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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.