Gowns, Inc. uses the percentage of receivables basis to estimate its bad debts. At December 31, 2014, Gowns estimates total bad debts that will become uncollectible in the future as €5,570. The existing balance in the Allowance for Doubtful Accounts is a debit balance of €1,320. The Accounts Receivable balance at December 31, 2014 is €99,000. The cash realizable value of Accounts Receivable reported on the statement of financial position at December 31, 2014 is

Question

Quizplus · Accepted Answer

The cash realizable value of accounts receivable is calculated by subtracting the estimated bad debts from the accounts receivable balance.

Estimated bad debts = €5,570 
Existing balance in allowance for doubtful accounts = €1,320 (which will also reduce the cash realizable value of accounts receivable)
Accounts receivable balance = €99,000

Cash realizable value of accounts receivable = Accounts receivable balance - Estimated bad debts - Allowance for doubtful accounts 
= €99,000 - €5,570 - €1,320 
= €93,430

Therefore, the correct answer is choice C.