Gowns, Inc.uses the percentage of receivables basis to estimate its bad debts.At December 31, 2011, Gowns estimates total bad debts that will become uncollectible in the future as €4,456.The existing balance in the Allowance for Doubtful Accounts is a debit balance of €1,056.The Accounts Receivable balance at December 31, 2011 is €79,200.The cash realizable value of Accounts Receivable reported on the statement of financial position at December 31, 2011 is

Question

Quizplus · Accepted Answer

To calculate the cash realizable value of Accounts Receivable, we need to deduct the estimated bad debts from the Accounts Receivable balance and the resulting amount will be the cash realizable value.

Total estimated bad debts = €4,456

Allowance for Doubtful Accounts = €1,056 (already deducted)

So, the remaining estimated bad debts = €4,456 - €1,056 = €3,400

Cash realizable value of Accounts Receivable = Accounts Receivable balance - estimated bad debts

= €79,200 - €3,400

= €74,800

Therefore, the correct option is C, i.e., €74,744.