Question

The following information relates to the beginning of the year: Accounts receivable, 245,000 Allowance for doubtful accounts (credit balance),12,250 During the current year, sales on account were 1,100,000 and collections on account were990,000. Also during the current year, the company wrote off 14,000 in uncollectible accounts. At year-end, an analysis of outstanding accounts receivable indicated that the allowance for doubtful accounts should have a17,000 credit balance so the company records the appropriate year-end adjusting entry. How much did the cash realizable value change during the current year?

1) $80,750 increase
2) $92,250 increase
3) $105,250 increase
4) $94,250 decrease
5) $4,750 increase

Answer 1

To calculate the change in cash realizable value, we need to consider sales, collections, write-offs, and the desired credit balance for the allowance for doubtful accounts. Unfortunately, we do not have enough information to calculate the exact change in cash realizable value.

Step-by-step explanation:

To calculate the change in cash realizable value during the current year, we need to consider the sales on account, collections on account, write-offs, and the desired credit balance for the allowance for doubtful accounts.

Starting with the beginning balance of accounts receivable of $245,000, we add the sales on account of $1,100,000 to get a total accounts receivable of $1,345,000.

Next, we subtract the collections on account of $990,000 and the write-offs of $14,000 to get an ending balance of accounts receivable of $341,000.

To calculate the cash realizable value, we subtract the ending balance of the allowance for doubtful accounts of $17,000 from the ending balance of accounts receivable, resulting in a cash realizable value of $324,000.

The change in cash realizable value during the current year is the difference between the beginning cash realizable value (before any adjustments) and the ending cash realizable value. Since the beginning cash realizable value is not given in the question, we cannot calculate the exact change. Therefore, we are unable to select any of the options provided.