The following information is related to December 31, 2013 balances. $\begin{array}{lc}
\text {- Accounts receivable } & \$ 700,000 \
\text {- Allowance for doubtful accounts (credit) } & (60,000) \
\text {- Cash realizable value } & 640,000
\end{array}$ During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was
A) $68,000 increase.
B) $80,000 increase.
C) $57,000 increase.
D) $69,000 increase.

Question

Quizplus · Accepted Answer

The cash realizable value at 12/31/14 is calculated as follows:  Accounts receivable at 12/31/13: $700,000  Add: Sales on account during 2014: $195,000  Less: Collections during 2014: $115,000  Less: Write-offs during 2014: $11,000  Ending accounts receivable: $769,000  Allowance for doubtful accounts at 12/31/14: $72,000  Cash realizable value at 12/31/14: $769,000 - $72,000 = $697,000  Change in cash realizable value: $697,000 - $640,000 = $57,000 increase.

The Following Information Is Related to December 31, 2013 Balances