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Receivables total $97,000 and the Allowance for receivables stands at $12,000. What is the net realisable value reported on the balance sheet?
A$109,000
B$85,000
C$97,000
D$12,000
Answer & Solution
Correct answer: B. $85,000
1. Net realisable value = Receivables - Allowance for receivables.
2. $$\$97{,}000 - \$12{,}000 = \$85{,}000$$
3. $109,000 adds the allowance instead of subtracting it.
4. $97,000 ignores the allowance; $12,000 is only the allowance. Both are wrong.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.4.2 "Allowance Method", p.141_
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