Accounts Receivable has a balance of​ $8,000, and the Allowance for Bad Debts has a credit balance of​ $420. The allowance method is used. What is the net realizable value of Accounts Receivable after a​ $180 account receivable is written​ off?

To find the net realizable value (NRV) of Accounts Receivable, we’ll go through the following steps:

1. **Initial Accounts Receivable Balance**: $8,000.
2. **Initial Allowance for Bad Debts**: $420 (credit balance).

Since we’re writing off an account receivable of $180, we need to:

1. **Adjust the Accounts Receivable**: Deduct $180 from the Accounts Receivable balance. 
   \[
   8,000 - 180 = 7,820
   \]

2. **Adjust the Allowance for Bad Debts**: The allowance will decrease by $180 as well because the write-off directly impacts this account.
   \[
   420 - 180 = 240
   \]

3. **Calculate Net Realizable Value (NRV)**: The NRV of Accounts Receivable is calculated by subtracting the adjusted Allowance for Bad Debts from the adjusted Accounts Receivable balance.
   \[
   7,820 - 240 = 7,580
   \]

**Answer**: The net realizable value of Accounts Receivable after the $180 account receivable is written off is **$7,580**.

Would you like more details on each step or have any other questions?

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Here are five related questions:
1. How does the allowance method for bad debts work?
2. What is the impact of a write-off on the income statement?
3. How is the allowance for bad debts estimated?
4. What are the differences between the direct write-off and allowance methods?
5. How can companies adjust their allowance for bad debts over time?

**Tip**: Always track adjustments to the allowance account carefully, as it directly impacts the accuracy of your receivables’ net realizable value.

Accounts Receivable has a balance of $8,000, and the Allowance for Bad Debts has a credit balance of $420. The allowance method is used. What is the net realizable value of Accounts Receivable after a $180 account receivable is written off?

Learn how to calculate the net realizable value of Accounts Receivable when an account receivable balance of $180 is written off. This example explains adjustments to the allowance for bad debts and provides a step-by-step solution. Suitable for students in Grades 10-12.

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