Question

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal the following data before year-end adjusting entries: Accounts receivable, $800,000; Allowance for doubtful accounts balance before adjustment (credit balance), $12,000; Amounts expected to become uncollectible, $65,000. How much is the cash realizable value (i.e., net realizable value) of the accounts receivable at December 31, after adjusting entries?

Answer 1

The cash realizable value of the accounts receivable at December 31, after adjusting entries, is $723,000.

Step-by-step explanation:

To calculate the cash realizable value, we need to determine the net realizable value of the accounts receivable. The net realizable value is the estimated amount of accounts receivable that the company expects to collect. After adjusting entries, the allowance for doubtful accounts balance will increase by the expected uncollectible amount. Therefore, the cash realizable value is calculated by subtracting the allowance for doubtful accounts from the accounts receivable.

Given the data provided:

• Accounts receivable: $800,000
• Allowance for doubtful accounts balance before adjustment (credit balance): $12,000
• Amounts expected to become uncollectible: $65,000

To calculate the cash realizable value:

1. Subtract the expected uncollectible amount from the allowance for doubtful accounts:
   
   

   $12,000 + $65,000 = $77,000

2. Subtract the result from the accounts receivable:
   
   

   $800,000 - $77,000 = $723,000

Therefore, the cash realizable value of the accounts receivable at December 31, after adjusting entries, is $723,000.