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Compute what is net realizable value of accounts receivable

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Potter Stables uses the aging method to estimate its bad debts. Sherman Potter, the company president, has given you the following aging of accounts receivable as of December 31, 2021, along with the historical probabilities that the account balances will not be collected. Actual accounts written off during the year were $27,000.

Account Age                   Balance                       Probability of not collecting

Current                         $290,000                    2%

1-45 days past due         110,000                     5%

46-90 days past due        68,000                     8%

Over 90 days past due      40,000                   15%

Problem 1: Find what is the net realizable value of accounts receivable that would be reported on the financial statements?

A. $481,000

B. $485,260

C. $508,000

Reference no: EM133007345

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