Question

On January 1, Henry Company's allowance for doubtful accounts had a credit balance of $44,000. The balance in the Accounts Receivable account on that date was $185,000. On January 2, prior to any credit sales, a $14,500 account from Walco Company was deemed to be uncollectible and written off.

Please show work and calculate:

Compute the net realizable value of Henry’s receivables on January 1.
What is the balance in the Accounts Receivable account immediately following the write-off of the Walco account?
Compute the net realizable value of Henry’s receivables on January 2, immediately following the write-off of the Walco account.

Answer 1

• Answer #1

Net Realizable Value of Henry’s Receivables on Jan 1

Accounts receivables	$              185,000.00
Less: Allowance for Doubtful Accounts	$                 44,000.00
Net Realizable Value	$              141,000.00

• Answer #2

The balance in Accounts Receivables immediately following the write off = $ 170,500

This is because written off amount reduces the Accounts receivables balance.

Hence, $ 185000 - $ 14500 = $ 170,500

Answer = $ 170,500

• Answer #3

Written off amount reduces the balances of both – Account receivables account as well as Allowance for Doubtful Account.

Accounts receivables [185000 – 14500]	$              170,500.00
Less: Allowance for Doubtful Accounts [44000 – 14500]	$                 29,500.00
Net Realizable Value	$              141,000.00