On January 1, 2014, Howe Company's Accounts Receivable balance was $10,000 and the balance in the Allowance for Doubtful Accounts was $500. On January 5, 2014, a $200 uncollectible account was written-off as uncollectible. Assuming that no other transactions related to accounts receivable had occurred, the net realizable value of accounts receivable immediately after the write-off was
A) $9,500.
B) $9,700.
C) $9,300.
D) $9,200.

Question

Quizplus · Accepted Answer

The net realizable value of accounts receivable is the amount of accounts receivable that is expected to be collected. To calculate the net realizable value, we start with the Accounts Receivable balance and subtract the Allowance for Doubtful Accounts. In this case, the Accounts Receivable balance is $10,000 and the Allowance for Doubtful Accounts is $500, so the net realizable value is $9,500. After the $200 uncollectible account is written off, the Allowance for Doubtful Accounts increases to $700 ($500 + $200). The net realizable value of accounts receivable is now $9,300 ($10,000 - $700).

On January 1, 2014, Howe Company's Accounts Receivable Balance Was