Tesser Company’s Accounts Receivable balance on December 31 was $90,000, and there was a debit balance of $600 in the Allowance for Doubtful Accounts. The firm estimates that 3% of the Accounts Receivable will prove to be uncollectible. After the appropriate adjusting entry is made for bad debts expense, what is the cash realizable value of accounts receivable included in the current assets at year-end? C. $87,300 is the Answer. Could you explain why you would only subtract 2700 ( 3% of AR balance) and not 2700 - 600= 2100? why does the debit balance of 600 not affect the bad debt expense?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Tesser Company’s
C. $87,300 is the Answer. Could you explain why you would only subtract 2700 ( 3% of AR balance) and not 2700 - 600= 2100? why does the debit balance of 600 not affect the bad debt expense?
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