Question

During 2017 sales on account were $866000 and collections on account were $522000. Also during 2017 the company wrote off $42500 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $329000. The change in the cash realizable value from the balance at 12/31/16 to 12/31/17 was a

Answer 1

Answer:

There is a change of $27,500 (decrease)

Explanation:

Cash realizable value is the amount of money that the company expects to receive from their accounts receivable after deducting all uncollectible accounts.

First, we must compute the change in gross accounts receivable from the transactions happened during the year.

Sales on account less collections less write-offs = change in Gross accounts receivable.

$866,000 - ($522,000 + $42,500) = $301,500 (increase in gross accounts receivable)

Finally, we can now compute the change in cash realization value by deducting uncollectible accounts to gross accounts receivable.

$301,500 - $329,000 = ($27,500)