Question

Using the following information: 12/31/17 Accounts receivable $526000 Allowance (35700 ) Cash realizable value $490300 During 2018, sales on account were $145400 and collections on account were $100000. Also during 2018, the company wrote off $3960 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $39300. The change in the cash realizable value from the balance at 12/31/17 to 12/31/18 was a $41440 increase. $43260 increase. $37840 increase. $45400 increase.

Answer 1

Answer:

The change in the cash realizable value from the balance 12/31/17 to 12/31/18 was $37,840 increase.

Explanation:

Cash realizable value of accounts receivable is simply the amount that is deemed recoverable after factoring the portion that is uncollectible.

The effects of the transactions during the year are as follows:

Sales on account:

Debit Accounts receivable                            $145,400

Credit Sales revenue                                     $145,400

(To recognize the sales on account)

Collections on account:

Debit Cash                                                      $100,000

Credit Accounts receivable                           $100,000

(To recognize collections on account)

Write-off:

Debit Allowance for doubtful accounts            $3,960

Credit Accounts receivable                               $3,960

(To recognize write-off of outstanding accounts receivable)

Therefore, the effects of the foregoing journals on Accounts receivable are: $526,000 + $145,400 - $100,000 - $3,960 = $567,440.

As at 12/31/18, cash realizable value would be $567,440 - $39,300 = $528,140. The change in the cash realizable value from the balance at 12/31/17 to 12/31/18 was therefore $528,140 - $490,300 = $37,840 (increase).