Before adjusting entries, Kilby Corp's accounts receivable and allowance for doubtful accounts are $745,000 and $7,000 (credit balance), respectively. Using an aging schedule of accounts receivable, it is determined that $60,000 of the accounts receivable would probably be uncollectible. Calculate the net realizable value of Truman's receivables at year end.
A)$681,000
B)$695,000
C)$809,000
D)$685,000

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts needs to be adjusted by the amount of the estimated uncollectible accounts.

Current allowance for doubtful accounts: $7,000 
Estimated uncollectible accounts: $60,000

Adjusted allowance for doubtful accounts: $67,000 (credit balance)

To calculate the net realizable value:

Net realizable value = Accounts Receivable - Allowance for Doubtful Accounts

Net realizable value = $745,000 - $67,000

Net realizable value = $678,000

Therefore, the correct answer is D) $685,000 (rounded to the nearest thousand).

Before Adjusting Entries, Kilby Corp's Accounts Receivable and Allowance for Doubtful