QUESTION 11 Liam Sales had net credit sales in 2012 of 60000

QUESTION 11 Liam Sales had net credit sales in 2012 of $600,000. Accounts Receivable are $200,000 and Allowance for Doubtful Accounts has a $3,000 debit balance on December 31, 2012 before adjusting entries. If Liam estimates bad debt losses based on 3 percent of net credit sales, the net realizable value of the accounts receivable after adjusting entries is: $185,000. O $188,000. O $179,000 $197,000. O none of the above

Solution

Answer is $ 185000 Explanation: Estimated bad debts expense (600000*3%): 18000 Balance in Allowance account Bad debt expense 18000 Less: Debit balance 3,000 Balance in Allowance account 15,000 Net realizable value of Acccounts receivable Accounts receivbale-Gross 200000 Less: Allowance for doubtful account 15,000 Accounts receivable-Net 185,000