The following information is related to December 31, 2016 balances. - Accounts receivable $\quad\quad\quad\quad\quad\quad\quad\quad \$ 3,150,000$
- Allowance for doubtful accounts (credit) $\quad ( 270,000 )$
- Cash realizable value $\quad\quad\quad\quad\quad\quad\quad\quad \$ 2,880,000$ During 2017 sales on account were $870,000 and collections on account were $516,000. Also during 2017 the company wrote off $48,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $324,000. The change in the cash realizable value from the balance at 12/31/16 to 12/31/17 was a
A)$300,000 increase.
B)$354,000 increase.
C)$252,000 increase.
D)$306,000 increase.

Question

Quizplus · Accepted Answer

The cash realizable value at 12/31/17 is calculated as follows: Starting with the accounts receivable at 12/31/16 ($3,150,000), add sales on account ($870,000), subtract collections ($516,000), and subtract write-offs ($48,000) to get the new accounts receivable balance of $3,456,000. The allowance for doubtful accounts is adjusted to $324,000. The cash realizable value is $3,456,000 - $324,000 = $3,132,000. The change from the previous cash realizable value ($2,880,000) is $3,132,000 - $2,880,000 = $252,000 increase.

The Following Information Is Related to December 31, 2016 Balances $3,150,000\quad\quad\quad\quad\quad\quad\quad\quad \$ 3,150,000$3,150,000

The Following Information Is Related to December 31, 2016 Balances $\quad\quad\quad\quad\quad\quad\quad\quad \$ 3,150,000$