Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Net Accounts Receivable: Direct Write-off Method

Financial Accounting

7. Receivables and Investments

Net Accounts Receivable: Direct Write-off Method

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Multiple Choice

A company has an accounts receivable balance of $50,000 on June 1. During June, it makes credit sales of $20,000 and collects $30,000 from customers. On June 25, it writes off an uncollectible account of $2,000 using the direct write-off method. What is the accounts receivable balance on June 30?

$68,000

$48,000

$40,000

$38,000

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Verified step by step guidance

Step 1: Start with the opening accounts receivable balance on June 1, which is $50,000.

Step 2: Add the credit sales made during June to the accounts receivable balance. Credit sales increase accounts receivable because they represent amounts owed by customers. Use the formula: Opening Balance + Credit Sales. In MathML:

Opening Balance + Credit Sales

Step 3: Subtract the collections from customers during June from the accounts receivable balance. Collections decrease accounts receivable because they represent cash received from customers. Use the formula: Accounts Receivable - Collections. In MathML:

Accounts Receivable - Collections

Step 4: Subtract the amount written off as uncollectible using the direct write-off method. Writing off an account reduces accounts receivable because it removes the uncollectible amount from the balance. Use the formula: Accounts Receivable - Write-Off Amount. In MathML:

Accounts Receivable - Write - Off Amount

Step 5: Calculate the final accounts receivable balance on June 30 by combining all the adjustments made in the previous steps. This will give you the updated balance after considering credit sales, collections, and the write-off.