Question

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data: Accounts receivable: $800,000 Allowance for doubtful accounts per books before adjustment (credit): $50,000 Amounts expected to become uncollectible : $65,000 What is the cash realizable value of the accounts receivable at December 31, after adjustment? Select one: a. $685,000. b. $750,000. c. $800,000. d. $735,000.

Answer 1

The correct option is D,$735,000

Step-by-step explanation:

The cash realizable value of accounts receivable for the year is the accounts receivable of $800,000 less the amount expected to become uncollectible in the current year which $65,000.

The realizable value of accounts receivable =$800,000-$65,000=$735,000

The allowance for doubtful accounts before adjustment was already dealt with in previous year,I mean the difference between last year allowance and this year was accounted for by posting $15,000 into allowance account thereby leading a closing balance of $65,000.