Data for the year ended December 31 are presented below:

-Refer to AT&U Company. If the company uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Question

Data for the year ended December 31 are presented below:
 
-Refer to AT&U Company. If the company uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Quizplus · Accepted Answer

To calculate the net realizable value of accounts receivable using the aging method, we need to first estimate the total amount of bad debts.

Age group	Amount	Percentage	Estimated Bad Debt
0-30 days	$400,000	2%	$8,000
31-60 days	$200,000	5%	$10,000
61-90 days	$100,000	10%	$10,000
Over 90 days	$100,000	30%	$30,000
Total Estimated Bad Debt Expense: $58,000

To find the net realizable value of accounts receivable, we need to subtract the estimated bad debt expense from the accounts receivable balance:

Accounts Receivable: $650,000 
Bad Debt Expense: -$58,000

Net Realizable Value of Accounts Receivable: $592,000

Therefore, the correct answer is B) $595,000, the closest option to our calculated value.

Data for the Year Ended December 31 Are Presented Below