Question

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Jupiter Corporation had $8,500 balance in accounts receivable at the beginning of the current year. The...

Jupiter Corporation had $8,500 balance in accounts receivable at the beginning of the current year. The beginning balance of allowance for doubtful accounts was $2,000. Early in January, $500 worth of receivable were written off as uncollectible. What is the net realizable value of accounts receivable, after the write off?

Select one:

a. $7,000

b. $1,500

c. $8,000

d. $6,500

e. $6,000

Expert Solution

Accounts Receivable at the Beginning of Current Year = $8,500

Allowance for Doubtful Accounts at the Beginning of Curent Year = $2,000

Early in January, $500 worth of receivable were written off as uncollectible.

Accounting Entry for Writing Off Receivables as Uncollectible:

Allowance for Doubtful Accounts A/c Dr $500

To Accounts Receivable A/c $500

Since Allowance for Doubtful Accounts is maintained, Bad Debts Written Off will be charged against that account only.

Also, Accounts Receivables will be reduced by the value of Bad Debts Written Off.

Net Realizable Value of Accounts Receivable, after the write off:

Accounts Receivable after the Write Off = Accounts Receivable at the Beginning of Current Year - Bad Debts Written Off = $8,500 - $500 = $8,000

Allowance for Doubtful Accounts after the Write Off = Allowance for Doubtful Debts at the Beginning of Current Year - Bad Debts Written Off =$2,000 - $500 = $1,500

Net Realizable Value of Accounts Receivable, after the write off = Accounts Receivable after the Write Off - Allowance for Doubtful Accounts after the Write Off = $8,000 - $1,500 = $6,500 (Option d)

ekkarill92 answered 1 year ago

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