Question

The net realizable value of accounts receivable is equal to:

A) gross accounts receivable less allowance for uncollectible accounts.
B) gross accounts receivable less bad debt expense.
C) gross accounts receivable less returns and allowances.
D) gross accounts receivable less sales discounts.

Answer 1

The net realizable value of accounts receivable is equal to gross accounts receivable less allowance for uncollectible accounts.

Step-by-step explanation:

The correct answer is A) gross accounts receivable less allowance for uncollectible accounts.

Net realizable value of accounts receivable is the amount a company expects to collect from its customers. It is calculated by subtracting the estimated amount of uncollectible accounts (allowance for uncollectible accounts) from the gross accounts receivable.

For example, if a company has $100,000 in gross accounts receivable and estimates that $5,000 will be uncollectible, the net realizable value of accounts receivable would be $100,000 - $5,000 = $95,000.