Answer:
The net realizable value of the company’s accounts receivable at the end of the period is $6,000,000
Explanation:
For computing the net realizable value, first we have to compute the ending balance of the accounts receivable which is shown below:
Ending balance = Beginning balance + credit sales - collections - written off accounts receivable
= $5,000,000 + $9,000,000 - $7,835,000 - $100,000
= $6,065,000
Now the ending balance of allowance for doubtful debts would be equal to
= Beginning balance + estimated amount - written off amount
= $75,000 + $90,000 - $100,000
= $65,000
The beginning balance of allowance for doubtful debts = Beginning balance of accounts receivable - net realizable value
= $5,000,000 - $4,925,000
= $75,000
And, the estimated amount would be
= Credit sales × estimated percentage
= $9,000,000 × 1%
= $90,000
Now the net realizable value equals to
= Ending balance of accounts receivable - ending balance of allowance for doubtful debts
= $6,065,000 - $65,000
= $6,000,000
