A company that uses the allowance method, writes-off a receivable of $7000. Prior to the journal entry, the credit balance in the Allowance for Uncollectible Accounts was $18,432 and Accounts Receivable were $2,001,000. After the entry to write-off the receivable is made, the net realizable value of Accounts Receivable will be:

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Quizplus · Accepted Answer

The net realizable value of Accounts Receivable is calculated as Accounts Receivable minus the Allowance for Uncollectible Accounts. Writing off a receivable affects both the Accounts Receivable and the Allowance for Uncollectible Accounts equally, so the net realizable value remains unchanged. Therefore, it remains $2,001,000 - $18,432 = $1,982,568.

A Company That Uses the Allowance Method, Writes-Off a Receivable