Question

A company Dr Jekyll and Mr Hyde Inc. has the following information from its balance sheet:

Cash $500,000
Accounts receivable $70,000
Allowance for Doubtful Accounts $4,500
Inventory $125,000
At the same time, there is a write-off of $2,000 on the accounts receivable. Based on this information, the value of the accounts receivable after the write-off is equal to:

Answer 1

The new value of accounts receivable after a $2,000 write-off from the original amount of $70,000 is $68,000. The Allowance for Doubtful Accounts is only an estimate for potential losses and does not directly affect the calculation.

Step-by-step explanation:

The value of the accounts receivable after the write-off is calculated by reducing the accounts receivable by the write-off amount. Originally, the accounts receivable is $70,000 and the write-off amount is $2,000. Therefore, the new value of accounts receivable after the write-off would be $70,000 - $2,000 = $68,000. It is important to note that the Allowance for Doubtful Accounts is not factored in this calculation because it serves as an estimate for future write-offs and not for specific write-off transactions.