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Financial Accounting

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Explain What Net Realizable Value Tells You

FINACT-3RQ31N

You are reading the financial statements for a firm and they report this in their year-end balance sheet:

Net Realizable Value:
Accounts Receivable \$295,000
Less: Allowance for Doubtful Accounts (\$25,000)
Net Realizable Value \$270,000

What does this information tell us about the firm?

A

They expect to collect \$295,000 from its customers.

B

The balance in their Accounts Receivable general ledger is \$270,000.

C

They will receive \$25,000 as late payments.

D

Their estimate for accounts that will be written off in the coming year is \$25,000.