At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000.Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)
A) $550,000
B) $544,500
C) $525,000
D) $575,000

Question

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000.​Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)​
A) $550,000
B) $544,500
C) $525,000
D) $575,000

Quizplus · Accepted Answer

The net realizable value of accounts receivable after adjustment is calculated by subtracting the adjusted balance of the Allowance for Doubtful Accounts from the Accounts Receivable balance. The adjusted balance of the Allowance for Doubtful Accounts is $25,000 (the estimated uncollectible receivables), which means the adjusting entry for bad debt expense will increase the allowance from its current $5,500 credit balance to $25,000. Therefore, the net realizable value is $550,000 (Accounts Receivable) - $25,000 (adjusted Allowance for Doubtful Accounts) = $525,000.

At the End of the Current Year, Accounts Receivable Has