Question

An analysis and aging of the accounts receivable of Hugh Company at December 31 revealed the following data: Accounts Receivable $900000 Allowance for Doubtful Accounts per books before adjustment (Cr.) 50000 Amounts expected to become uncollectible 56000 The cash realizable value of the accounts receivable at December 31, after adjustment, is:

Answer 1

$844,000

Step-by-step explanation:

Given that,

Accounts Receivable = $900,000

Credit balance of Allowance for Doubtful Accounts per books before adjustment = $50,000

Expected amount of uncollectible = $56,000

Bad debt expense at the end of the period is determined by subtracting the credit balance of allowance for doubtful accounts from the expected amount of uncollectible.

Bad debt expense:

= Expected amount of uncollectible - Credit balance

= $56,000 - $50,000

= $6,000

At the end of the period, the allowance for doubtful accounts has a balance of $56,000 that are to be uncollectible.

The cash realizable value of the accounts receivable at December 31, after adjustment, is determined by simply subtracting the Allowance for doubtful accounts from the accounts receivable. It is calculated as follows:

= Accounts Receivable - Allowance for doubtful accounts

= $900,000 - $56,000

= $844,000