Implementation of this policy impact net realizable value

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M. Beall collected the following information about his company's outstanding accounts receivable and their probability of collection. He used the aging method to calculate the company's bad debt expense with the following information: Account age 0-30 days amount 725,000 and probability of non collection 0.50%, account age 31-60 days amount 275,000 and probability of non collection 1.50%, account age 61-90 days amount 170,000 and probability of non collection 2.50%, account age 91-120 days amount 100,000 and probability of non collection 4.00%, and accounts over 120 days amount is 40,000 with a probability of non collection of 20.00%. Assume that M. Beall Inc. adopts a policy of writing off as worthless all unpaid accounts receivable over 120 days old. How will implementation of this policy impact the net realizable value of the company’s accounts receivable? And Why? Please show how you calculated your answers.

Reference no: EM131294370

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