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The CHS Company has provided the following information: Accounts receivable written-off as uncollectible during the year amounted to $11,900. The accounts receivable balance at the beginning of the year was $190,000. The accounts receivable balance at the end of the year was $250,000. The allowance for doubtful accounts balance at the beginning of the year was $14,400. The allowance for doubtful accounts balance at the end of the year after the recording of bad debt expense was $13,300. Credit sales during the year totaled $920,000. How much cash was received from collections of accounts receivable

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Answer:

The cash that was received from collections of accounts receivable is $848,100.

Explanation:

The following journals explain the accounting effects of the transactions during the year:

Debit Allowance for doubtful accounts              $11,900

Credit Accounts receivable                                 $11,900

(To record write-off of accounts receivable)

With the above journals, the movement in accounts receivable will be:

Opening balance                                               $190,000

Write-off during the year                                    ($11,900)

Credit sales (Addition)                                      $920,000

Collections                                                        ($848,100)

Balance, end of the year                                $250,000

Net cash realizable value is $250,000 - $13,300 = $236,700

  • You do not necessarily have to consider the allowance for doubtful accounts in arriving at collections.
  • The collections amount was arrived at as a balancing figure.

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