At the close of its first year of operations, December 31, 2007, Linn Company had accounts receivable of $540,000, after deducting the related allowance for doubtful accounts.During 2007, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible, accounts receivable of $40,000.What should the company report on its balance sheet at December 31, 2007, as accounts receivable before the allowance for doubtful accounts?

Question

Quizplus · Accepted Answer

The accounts receivable before the allowance for doubtful accounts can be calculated as follows:

Accounts Receivable (net of allowance) = $540,000
Allowance for Doubtful Accounts = ($540,000 - Accounts Receivable) = ($540,000 - $490,000) = $50,000

Accounts Receivable (before allowance) = Accounts Receivable (net of allowance) + Allowance for Doubtful Accounts 
= $540,000 + $50,000 
= $590,000

Therefore, the company should report $590,000 as accounts receivable before the allowance for doubtful accounts on its balance sheet at December 31, 2007.

At the Close of Its First Year of Operations, December