If accounts receivable total 50000 and the allowance for doubtful accounts is 3000, what is the net realizable value?

If accounts receivable total 50000 and the allowance for doubtful accounts is 3000, what is the net realizable value?

• A. 47000
• B. 53000
• C. 50000
• D. 3000

Answer: (A)

Net realizable value is the amount of accounts receivable that you actually expect to collect. It equals gross accounts receivable minus the allowance for doubtful accounts, because the allowance represents estimated uncollectible amounts that reduce what you can ultimately realize. So, 50,000 minus 3,000 equals 47,000. That is the net realizable value. Why the other figures aren’t correct: adding the allowance to accounts receivable would overstate what you expect to collect, and treating the number as just the gross receivable ignores the estimated uncollectibles. The allowance alone isn’t what you expect to collect either; it’s the deduction from gross receivables to reach the net amount.

Net realizable value is the amount of accounts receivable that you actually expect to collect. It equals gross accounts receivable minus the allowance for doubtful accounts, because the allowance represents estimated uncollectible amounts that reduce what you can ultimately realize.

So, 50,000 minus 3,000 equals 47,000. That is the net realizable value.

Why the other figures aren’t correct: adding the allowance to accounts receivable would overstate what you expect to collect, and treating the number as just the gross receivable ignores the estimated uncollectibles. The allowance alone isn’t what you expect to collect either; it’s the deduction from gross receivables to reach the net amount.