Question

harleston, Inc. has Accounts Receivable of $280,000 and an Allowance for Doubtful Accounts of $18,000. If it writes-off a customer account balance of $1,800, what is the amount of its net accounts receivable? Multiple Choice $280,000 $262,000 $278,200 $260,200

Answer 1

Answer:

The correct answer is $262,000

Explanation:

Net Accounts receivable alludes to the sum that the organization will really get from its clients when they would make the installment for credit deals made to them.  

Allowance for Doubtful Accounts is the sum the organization expects it won't get from its clients and subsequently it would not bring about assortment from credit deals.

Thus,

Net Accounts receivable = Gross Accounts receivable - Allowance for Doubtful Accounts

Net Accounts receivable = $280,000 - $18,000

Net Accounts receivable = $262,000

Note: The Amount discounted will have no effect on the Net Accounts receivable as it is now included for Allowance for Doubtful Accounts and in this way no treatment of $1,800 is required

Answer 2

Answer:

$262,000

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

The net receivable is the difference between the accounts receivable and the allowance for doubtful debt balance. The amount written off would be deducted from the two balances as expressed.

Allowance balance = $18,000 - $1,800

= $16,200

Accounts receivable balance = $280,000 - $1,800

= $278,200

Net accounts receivable = $278,200  - $16,200

= $262,000