Multiple Choice
The percentage-of-receivables approach to measuring bad debt expense is referred to as:
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7. Receivables and Investments
Net Accounts Receivable: Allowance for Doubtful Accounts
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A company reports Accounts Receivable of \$50,000 and an Allowance for Doubtful Accounts of \$2,000. What is the net accounts receivable reported on the balance sheet?
A
$50,000
B
$52,000
C
$48,000
D
$2,000
Verified step by step guidance1
Understand the concept: Net Accounts Receivable is calculated by subtracting the Allowance for Doubtful Accounts from the total Accounts Receivable. This represents the amount the company expects to collect.
Identify the given values: Accounts Receivable is $50,000, and the Allowance for Doubtful Accounts is $2,000.
Set up the formula for Net Accounts Receivable: Net Accounts Receivable = Accounts Receivable - Allowance for Doubtful Accounts.
Substitute the given values into the formula: Net Accounts Receivable = $50,000 - $2,000.
Perform the subtraction to determine the Net Accounts Receivable, which will be reported on the balance sheet.
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