On January 1, Year 2, the Accounts Receivable balance was $30,600 and the balance in the Allowance for Doubtful Accounts was $3,

Question

3 years ago

15

On January 1, Year 2, the Accounts Receivable balance was $30,600 and the balance in the Allowance for Doubtful Accounts was $3,

700. On January 15, Year 2, an $1,070 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

Business

2 answers:

wolverine [178] · Answer 1 · 2022-07-11T00:50:37+03:00

Answer:

The net will be the same as January 1st, because the wri-off makes both account decrease. As long as the write-off doesn't surpass the allowance, the net AR will not change for write-off.

Net value at Jan 15th 26,900

Explanation:

<em><u>Verification:</u></em>

<u>Balance at jan 1st</u>

account receivable 30,600

Allowance 3,700

Net value at Jan 1st 26,900

Jan 15th

allowance debit 1,070

account receivable credit 1,070

<u>Balance at Jan 15th</u>

account receivable 29,530

Allowance 2,630

Net value at Jan 15th 26,900

tatyana61 [14] · Answer 2 · 2022-07-10T22:53:15+03:00

Net Realization Value (NRV) as of January 1 = Accounts receivable balance - balance in Allowance for Doubtful Accounts

= $ 30,600 - $ 3,700

= $ 26,900

As of January 15 = Non-billable balance = $ 1,070

Receivable balance written off = $ 1,070

So as of January 15: Accounts receivable balance - non-billable balance

= $ 30,600 - $ 1,070

= $ 29,530

: balance in Allowance for Doubtful Accounts - Receivable balances written off

= $ 3,700 - $ 1,070

= $ 2,630

Net Realization Value (NRV) as of January 15 = Accounts receivable balance - balance in Allowance for Doubtful Accounts

= $ 29,530 - $ 2,630

= $ 26,900

Thus, the Net Realization Value (NRV) as of January 15 is $ 26,900

<h2>Further Explanation </h2>

Inventory recording is recorded based on the costs used for the inventory. However, inventory usually experiences a decrease in value because of damage, obsolescence, falling prices, etc. which causes the value of inventory to also be reduced. Therefore, inventories are reported at the lowest cost/net realizable value.

Inventory recording is divided into two, namely:

Net Realizable Value

Net realizable value is the estimated selling price in normal business conditions less than the estimated costs of completion and estimated costs for sales. Then the net Realization Value can be calculated by the formula: (Accounts receivable balance - balance in Allowance for Doubtful Accounts) note: for the case above the name index is replaced but has the same meaning so the formula used is the same.