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30 August, 05:31

John Den Bear Company had a $150,000 beginning balance in Accounts Receivable and a $6,000 credit balance in the Allowance for Doubtful Accounts. During the year, credit sales were $600,000 and customers' accounts collected were $590,000. Also, $4,000 in worthless accounts were written off. What was the net amount of receivables included in the current assets at the end of the year, before any provision was made for doubtful accounts?

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  1. 30 August, 07:10
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    The net amount of receivables is $154,000

    Explanation:

    For computing the net amount of receivables, first, we have to compute the ending balance of accounts receivable and ending balance of allowance for Doubtful Accounts which is shown below:

    Ending balance of accounts receivable = Beginning balance + credit sales - customers' accounts collected - write off amount

    = $150,000 + $600,000 - $590,000 - $4,000

    = $156,000

    And, the ending balance of allowance for Doubtful Accounts equal to

    = Beginning balance - write off amount

    = $6,000 - $4,000

    = $2,000

    Now the net amount of receivables equal to

    = Ending balance of accounts receivable - ending balance of allowance for Doubtful Accounts

    = $156,000 - $2,000

    = $154,000
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