Accounts Receivable Analysis and Aging Data

What is the cash realizable value of the accounts receivable at December 31 after adjustment?

A. $844,000

B. $900,000

C. $50,000

D. $56,000

Answer:

$844,000

Given the data from an analysis and aging of the accounts receivable of Hugh Company at December 31, the cash realizable value of the accounts receivable after adjustment is $844,000. This value is calculated by subtracting the Allowance for Doubtful Accounts from the Accounts Receivable.

Accounts Receivable = $900,000

Allowance for Doubtful Accounts per books before adjustment = $50,000

Amounts expected to become uncollectible = $56,000

Bad debt expense is determined by subtracting the credit balance of the allowance for doubtful accounts from the expected amount of uncollectible.

Bad debt expense:

= Expected amount of uncollectible - Credit balance

= $56,000 - $50,000

= $6,000

After adjustment, the cash realizable value of the accounts receivable is calculated as follows:

= Accounts Receivable - Allowance for Doubtful Accounts

= $900,000 - $56,000

= $844,000

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