The Following Comparative Financial Statements for the Years Ended December

question 62

Essay

The following comparative financial statements for the years ended December 31,Year 2 and Year 1 are provided for Air Plus Company:
$\begin{array} { l r r } \text { Balance Sheet: } & \text { Year 2 } & \text { Year 1 } \\\quad \text { Cash and cash equivalents } & \$ 87,000 & \$ 71,600 \\\text { Accounts receivables, less allowance for doubtful } & & \\\quad \text { accounts of \$90 (Year 2) and \$82 (Year 1) } & 3,800 & 2,500 \\\text { Notes receivable } & 15,000 & 20,000 \\& & \\\text { Income Statement: } \\ \quad \text { Net sales for the year } & \$ 9,700 & \$ 8,800 \\\text { Net income for the year } & 920 & 1,050\end{array}$

Answer these questions concerning the company's receivables:
A) What is the gross amount of accounts receivable at December 31, Year 2? Why is this amount different from the amount of receivables shown in the Year 2 column of the balance sheet?

B) What is the net realizable value of accounts receivable at December 31, Year 2? What does this amount represent?

C) How should accounts receivable be classified on a classified balance sheet? Why?

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Definitions:

Historical

Pertaining to or concerned with the study of past events and times.

Past Epochs

Past periods or ages in history characterized by distinctive features or events, often used to discuss the evolution of societies or civilizations.

Ideal Type

A conceptual tool used in sociology, created by Max Weber, that serves as a model for understanding social phenomena by emphasizing the most significant characteristics, often to compare real situations against an idealized or pure form.

Structural

Related to the underlying or organizing framework of a system, often used in contexts such as sociology, engineering, and architecture.