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What the cash realizable value of accounts receivable

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Question - Gowns, Inc. uses the percentage of receivables basis to estimate its bad debts. At December 31, 2020, Gowns estimates total bad debts that will become uncollectible in the future as €11,140. The existing balance in the Allowance for Doubtful Accounts is a debit balance of €2,640. The Accounts Receivable balance at December 31, 2020 is €198,000.

Required -

1. What the cash realizable value of Accounts Receivable reported on the statement of financial position at December 31, 2020?

a. €184,220

b. 209,140

c. 186,860

d. 189,500

2. The amount of the bad debts adjusting entry at December 31, 2020 will impact the statement of financial position by:

a. Increasing the Allowance for Doubtful Accounts by €8,500.

b. Increasing the Allowance for Doubtful Accounts by €11,140.

c. Increasing the Allowance for Doubtful Accounts by €13,780.

d. Increasing expenses by €11,140.

Reference no: EM133105976

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