Question

On January 1, Year 2, the Accounts Receivable balance was $29,000 and the balance in the Allowance for Doubtful Accounts was $3,400. On January 15, Year 2, an $980 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

Answer 1

The net realizable value of accounts receivable remains at $29,000 after the write-off of the $980 uncollectible account, because the write-off reduces the Allowance for Doubtful Accounts, leaving the net value unchanged.

Step-by-step explanation:

The net realizable value of accounts receivable immediately after the write-off is the amount of accounts receivable that the company expects to collect. To calculate this, we start with the Accounts Receivable balance of $29,000 on January 1, Year 2. When an uncollectible account of $980 is written off on January 15, Year 2, we reduce the Accounts Receivable balance, but since the write-off is recorded against the existing Allowance for Doubtful Accounts balance, there is no immediate impact on the net realizable value. The Allowance for Doubtful Accounts had a balance of $3,400, which is meant to absorb such write-offs. After the write-off, the net realizable value remains unchanged at the Accounts Receivable balance of $29,000 because the Allowance for Doubtful Accounts has been reduced by $980 to $2,420 ($3,400 - $980).