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Net Realizable Value of A/R and Allowance for Bad Debts

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A portion of the current assets section of the December 31, 2010, balance sheet for Gibbs Co. is presented here:

Accounts receivable $ 23,400
Less: Allowance for bad debts (2,500) $ 20,900


The company's accounting records revealed the following information for the year ended December 31, 2011:

Sales (all on account) $ 151,500
Cash collections from customers 154,500
Accounts written off 2,700
Bad debts expense (accrued at 12/31/11) 5,900


Calculate the net realizable value of accounts receivable at December 31, 2011, and allowance for bad debts for Gibbs Co., as of that point in time. (Hint: Use T-accounts to analyze the Accounts Receivable and Allowance for Bad Debts accounts.) (Amounts to be deducted should be indicated with minus sign. Omit the "$" sign in your response.)

At December 31, 2011:
Accounts receivable $
Less: Allowance for bad debts $

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Solution Summary

Using T-accounts, this solution illustrates how to compute the net realizable value of a company's accounts receivable and its allowance for doubtful accounts.