XYZ Company had an accounts receivable account balance of $300 000 and allowance for doubtful debts account balance of $12 500 prior to writing off a bad debt of $3000. The estimated net realisable value of accounts receivable before and after the write-off were, respectively:
A) $12 500 and $309 500.
B) $287 500 and $284 500.
C) $287 500 and $287 500.
D) $300 000 and $297 000.

Question

Quizplus · Accepted Answer

Before the write-off, the estimated net realizable value of accounts receivable is calculated by subtracting the allowance for doubtful debts ($12,500) from the accounts receivable balance ($300,000), which equals $287,500. After writing off the bad debt of $3,000, the accounts receivable balance decreases by $3,000, but this does not affect the net realizable value because the allowance for doubtful debts had already accounted for this potential loss. Therefore, the estimated net realizable value remains $287,500.

XYZ Company Had an Accounts Receivable Account Balance of $300