   Chapter 16, Problem 1SEA

Chapter
Section
Textbook Problem

CALCULATION OF NET REALIZABLE VALUE L. R. Updike owns a department store that has a $50,000 balance in Accounts Receivable and a$2,500 credit balance in Allowance for Doubtful Accounts. 1. Determine the net realizable value of the accounts receivable. 2. Assume that an account receivable in the amount of \$500 was written off using the allowance method. Determine the net realizable value of the accounts receivable after the write-off.

1.

To determine

Calculate the net realizable value of the accounts receivable.

Explanation

Net realizable value: Net realizable value is the net amount of receivables which a business expects to collect from its debtors. Accounts receivable less allowance for doubtful accounts is represented as cash realizable value.

Formula to calculate the net realizable value:

Net realizable value=Accounts receivable-Allowance for doubtful accounts

Calculate the net realizable value of the accounts receivable:

Net realizable valu

2.

To determine

Calculate the net realizable value of the accounts receivable after the write-off.

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