[Janelle101]

An analysis and aging of account receivable of the Peachey Company at Dec, 2008:
Acounts Receivable... 840,000
Allowance for doubtful accounts
(before adjustment)... 36,000
Accounts estimated to be uncollectible... 76,800

Compute the net realizable value of the accounts receivable of Peachey company at Dec 31,2008

Our working: 840,000 - 36,000 - 76,800 = 727,200

Please tell us is it correct or what are we doing wrong. :confused:

[rehmanvohra]

The net realizable value of accounts receivable will be
Gross amount receivable $840,000
Allowance for doubtful accounts ($76,800)
Net realizable value $763,200

As far as I can see, the error you made is including the opening balance of the allowance account as a deduction from the amount of receivables.

The unadjusted balance of $36,000 represents an allowance made in the previous year less deduction of actual bad debts or reinstatement of previously written off bad debts, if any. When the entity estimates uncollectibles of $76,800, it suggests that out of the total receivables of $840,000, this amount is expected to be uncollected. The increase in the allowance account from $36,000 to $76,800 represents the bad debts expense for the current year.

[Janelle101]

Thank you a lot also thank you for the explanation I always write it down so I will remember my error. Thank you again.