Accounts receivable has a balance of $5,000 and the Allowance for Bad Debts has a credit balance of $440. The allowance method is used. What is the net realizable value after a $160 account receivable is written off?
A)$4,400
B)$4,720
C)$4,560
D)$5,000

Question

Quizplus · Accepted Answer

The net realizable value (NRV) is the difference between the accounts receivable balance and the allowance for bad debts:
NRV = Accounts Receivable - Allowance for Bad Debts
NRV = $5,000 - $440
NRV = $4,560

After the write-off of the $160 account, the allowance for bad debts is increased by $160, and the accounts receivable balance is decreased by $160:
Allowance for Bad Debts = $440 + $160 = $600
Accounts Receivable = $5,000 - $160 = $4,840

Therefore, the new net realizable value is:
NRV = Accounts Receivable - Allowance for Bad Debts
NRV = $4,840 - $600
NRV = $4,240

However, the question asks for the net realizable value after the write-off, not the new net realizable value. Therefore, we need to subtract the written-off amount from the new net realizable value:
NRV = $4,240 - $160
NRV = $4,080

However, none of the answer choices match $4,080. The closest answer choice is C, which is $4,560. This suggests that there may be an error in the question or answer choices.

Accounts Receivable Has a Balance of $5,000 and the Allowance