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17 June, 07:06

12/31/06Accounts receivable $525,000Allowance (45,000) Cash realizable value 480,000During 2007 sales on account were $145,000 and collections on account were $86,000. Also, during 2007 the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $54,000.48. The change in the cash realizable value from the balance at 12/31/06 to 12/31/07 wasa. $50,000 increaseb. $59,000 increasec. $42,000 increased. $51,000 increase

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  1. 17 June, 10:12
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    c. $42,000 increase

    Explanation:

    The computation of the change in cash realizable value is shown below:

    = Adjusted cash balance - Cash realizable value

    where,

    Adjusted cash balance = Ending balance of accounts receivable + sales on account - collections - written off amount - bad debt expense

    = $525,000 + $145,000 - $86,000 - $8,000 - $54,000

    = $522,000

    And, the cash realizable value is $480,000

    Now put these values to the above formula

    So, the value would be equal to

    = $522,000 - $480,000

    = $42,000 increase
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