Final answer:
The change in the cash realizable value from the balance at 12/31/20 to 12/31/21 is an $84,860 increase. To find the change in the cash realizable value from 12/31/20 to 12/31/21, update the accounts receivable with the year's transactions, adjust the allowance for uncollectible accounts, and then calculate the new cash realizable value. Finally, compare this to the previous year's value. The correct answer is B.
Step-by-step explanation:
The change in the cash realizable value from the balance at 12/31/20 to 12/31/21 can be calculated by using the following formula:
Change in Cash Realizable Value = Sales on Account - Collections on Account - Write Offs + Estimated Uncollectible Accounts
Using the given information, the calculation is as follows:
Change in Cash Realizable Value = $145,000 - $98,800 - $3,940 + $39,600 = $84,860
Therefore, the change in the cash realizable value from the balance at 12/31/20 to 12/31/21 is an $84,860 increase.
To find the change in the cash realizable value from 12/31/20 to 12/31/21, update the accounts receivable with the year's transactions, adjust the allowance for uncollectible accounts, and then calculate the new cash realizable value. Finally, compare this to the previous year's value.
The question is asking to calculate the change in the cash realizable value of accounts receivable from 12/31/20 to 12/31/21 for a company following the sales, collections, and write-offs activities during the year 2021. First, we need to update the opening accounts receivable balance with the year's transactions. The beginning accounts receivable balance on 12/31/20 was $530,000, from which we need to subtract the collections on account ($98,800) and the write-offs ($3,940), then add the sales on account ($145,000).
After updating the accounts receivable for these transactions, we also need to adjust the allowance for uncollectible accounts to the new estimate of $39,600 at the end of 2021. By subtracting this new allowance from the updated accounts receivable total, we will arrive at the year-end cash realizable value. The difference between the cash realizable value at the end of 2020 and 2021 will give us the change during the year.
To summarize, the calculation steps are:
Update accounts receivable balance: $530,000 - $98,800 - $3,940 + $145,000.
Calculate the new cash realizable value and compare it to the previous year's value to find the change.