An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: What is the cash realizable value of the accounts receivable at December 31 after adjustment?
A)$2,740,000
B)$3,000,000
C)$3,200,000
D)$2,940,000

Question

An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data:  What is the cash realizable value of the accounts receivable at December 31 after adjustment?
A)$2,740,000 
B)$3,000,000 
C)$3,200,000 
D)$2,940,000

Quizplus · Accepted Answer

The cash realizable value is the amount of accounts receivable that the company expects to collect in cash. To calculate this, we need to subtract the allowance for doubtful accounts from the total accounts receivable. In this case, the allowance for doubtful accounts is $60,000 (5% of $1,200,000). Therefore, the cash realizable value is $2,940,000 ($3,000,000 - $60,000). Option D is the correct answer.

An Analysis and Aging of the Accounts Receivable of Watts