Multiple Choice
Which of the following best describes the cash net realizable value of accounts receivable on the balance sheet?
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7. Receivables and Investments
Net Accounts Receivable: Allowance for Doubtful Accounts
Multiple Choice
The original cost of an asset minus accumulated depreciation is known as:
A
Market value
B
Allowance for doubtful accounts
C
Net accounts receivable
D
Book value
Verified step by step guidance1
Understand the concept of 'Book Value': In financial accounting, the book value of an asset is calculated as the original cost of the asset minus the accumulated depreciation. It represents the value of the asset as recorded in the company's books.
Identify the components: The original cost refers to the purchase price or acquisition cost of the asset, while accumulated depreciation is the total amount of depreciation that has been charged against the asset over time.
Relate the formula: The formula for book value can be expressed as:
Differentiate from other terms: Market value refers to the current selling price of the asset in the market, allowance for doubtful accounts is a contra-asset account related to receivables, and net accounts receivable is the total receivables minus the allowance for doubtful accounts.
Apply the concept: When solving problems related to book value, always subtract the accumulated depreciation from the original cost of the asset to determine its book value.
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