Question

Accounts Receivable has a balance of​ $34,000, and the Allowance for Bad Debts has a credit balance of​ $3,400. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a​ $2,300 account receivable is written​ off?

Answer 1

Answer:

$30,600 before and after the write off.

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 debts.

Net realizable value of accounts receivable before write off

= $34,000 - $3,400

= $30,600

Net realizable value of accounts receivable after write off of $2,300

= $34,000 - $3,400

= $30,600

The amount written off will only reduce the receivable and the allowance hence the effect is nil.