At the end of its first year of operations, and before the adjusting entries at December 31, a company had a balance in accounts receivable of $250,000. The adjustments included a $2,000 write-off of an uncollectible account and recording bad debt expense of $3,500. What should the company report on its balance sheet at December 31, as net accounts receivable?
A) $246,500
B) $248,000
C) $248,500
D) $256,000

Question

Quizplus · Accepted Answer

The correct answer is A. The net accounts receivable is the balance in accounts receivable minus the allowance for bad debts. The allowance for bad debts is increased by the amount of bad debt expense recorded, and decreased by the amount of uncollectible accounts written off. In this case, the allowance for bad debts is increased by $3,500 and decreased by $2,000, resulting in a net increase of $1,500. The net accounts receivable is therefore $250,000 - $1,500 = $248,500.

At the End of Its First Year of Operations, and Before