Question At January1, 2004, XYZ Company reported accounts receivable of $384,000

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At January1, 2004, XYZ Company reported accounts receivable of $384,000 andan allowance for
doubtful accounts with a $25,000 credit balance. During 2004, XYZreported net credit sales
of $780,000 and collected $659,000 cash from its credit customers.Additionally during 2004,
XYZ wrote-off as uncollectible accounts receivable totaling $17,000and reported recoveries
of previously written-off accounts receivable of $22,000. Based onan aging of its accounts
receivable at December 31, XYZ Company determined that its bad debtexpense for 2004 was
equal to $48,000.

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Explanation / Answer

Net Realizable value $ 462,000 Explanation Accounts receivable Beginning receivables + sales - cash collected = Endingreceivables 384,000 + 780,000 - 659,000 = 505,000 Given in the problem, $ 22,000 of previously written off collectedand $ 17,000 wrote off for this year. 505,000 + 22,000 -17,000 = $ 510,000. Allowance for doubtful accounts Bad debts given is 48,000 , which means the end of allowanceaccount should be 48,000. Beginning allowance + accounts receivable collected - wrote offreceivables + bad debts = 48,000 25,000 + 22,000 -17,000 + bad debts = 48,000 25,000 + 22,000 -17,000-48,000 = bad debts bad debts = 18,000.( this number actually goes in to allowanceaccount). Net realizable receivables Receivables - allowance 510,000 - 48,000 = $ 462,000

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