Long Company's Accounts Receivable account has a balance of $322,000 and the Allowance for Doubtful Accounts has a negative balance of $850 at fiscal year-end prior to adjustment. If the estimate based on the percentage of sales approach to estimating uncollectibles is $19,900, the net realizable value of accounts receivable reported on the balance sheet after adjustment is:

Question

Quizplus · Accepted Answer

The net realizable value of accounts receivable is calculated by subtracting the adjusted Allowance for Doubtful Accounts from the Accounts Receivable balance. The adjustment to the Allowance for Doubtful Accounts is the difference between the current balance (-$850) and the new estimate ($19,900), which is $20,750 ($19,900 - (-$850)). Therefore, the adjusted net realizable value is $322,000 (Accounts Receivable) - $20,750 (adjusted Allowance for Doubtful Accounts) = $301,250. However, the correct calculation should consider the negative sign of the initial Allowance for Doubtful Accounts balance correctly, leading to the adjusted balance of the Allowance for Doubtful Accounts being $19,900, not the difference calculation I mistakenly described. Subtracting the correct adjusted allowance from the Accounts Receivable gives us $322,000 - $19,900 = $302,100, which is not among the options provided due to my calculation error. The correct approach to find the net realizable value after adjustment directly involves subtracting the new allowance estimate from the Accounts Receivable balance, which I incorrectly calculated. The correct net realizable value should indeed be based on the proper adjustment of the allowance account according to the new estimate, directly affecting the net realizable value calculation.

Long Company's Accounts Receivable Account Has a Balance of $322,000