How are net realizable receivables calculated?

Question

Quizplus · Accepted Answer

Net realizable receivables are calculated by subtracting the allowance for doubtful accounts from accounts receivable. This gives a more accurate estimate of the amount of receivables that are actually expected to be collected. Option A is incorrect because it adds the allowance amount instead of subtracting it. Option B is incorrect because NSF checks are included in the allowance for doubtful accounts and should be subtracted from accounts receivable. Option D is incorrect because it divides accounts receivable by the allowance, which is not a valid calculation for net realizable receivables.

How Are Net Realizable Receivables Calculated