Question

Accounts Receivable has a balance of $ 5 comma 000​, and the Allowance for Bad Debts has a credit balance of $ 420. The allowance method is used. What is the net realizable value of Accounts Receivable after a $ 140 account receivable is written​ off?

Answer 1

$4,580

Step-by-step explanation:

since we are using the allowance method, the journal entry to record the write off is:

Dr Allowance for bad debts 140

Cr Accounts receivable 140

So the accounts receivable balance = $5,000 - $140 = $4,860

the allowance for bad debts balance = $280

accounts receivable net balance = $4,860 - $280 = $4,580

Allowance for bad debts accounts is a contra asset account that reduces the balance of accounts receivable.