Question

The following information relates to the beginning of the year:

Accounts receivable, $700,000
Allowance for doubtful accounts (credit balance), $60,000
Cash realizable value, $640,000
During the current year, sales on account were $195,000 and collections on account were $95,000. Also during the current year, the company wrote off $11,000 in uncollectible accounts. At year-end, an analysis of outstanding accounts receivable indicated that the allowance for doubtful accounts should have a $72,000 credit balance so the company records the appropriate year-end adjusting entry.
How much did the cash realizable value change during the current year?

Answer 1

$77,000

Step-by-step explanation:

Ending accounts receivables = beginning accounts receivables + sales on account - collections on account - write offs = $700,000 + $195,000 - $95,000 - $11,000 = $789,000

Ending allowance for doubtful accounts = $72,000

Ending cash realizable value = ending accounts receivables - ending allowance for doubtful accounts = $789,000 - $72,000 = $717,000

Beginning cash realizable value = $640,000

Change in cash realizable value = ending cash realizable value - beginning cash realizable value = $717,000 - 640,000 = $77,000