The net realizable value of accounts receivable is equal to:
A) gross accounts receivable less allowance for uncollectible accounts.
B) gross accounts receivable less bad debt expense.
C) gross accounts receivable less returns and allowances.
D) gross accounts receivable less sales discounts.

Question

Quizplus · Accepted Answer

Net realizable value of accounts receivable is the amount that the company actually expects to receive. It is calculated by subtracting the estimated amount of uncollectible accounts (allowance for doubtful accounts) from the gross accounts receivable. Therefore, option A is correct. Option B is incorrect because bad debt expense is an expense account and has nothing to do with the estimation of net realizable value. Options C and D are incorrect because returns, allowances, and sales discounts are not related to the estimation of the net realizable value of accounts receivable.

The Net Realizable Value of Accounts Receivable Is Equal To