Calculating Allowance for Doubtful Accounts

Explanation:

Net Realizable Value Calculation:

The net realizable value of accounts receivable is calculated to determine the balance of Allowance for Doubtful Accounts after adjustment. The formula to find the net accounts receivables is:

Net Accounts Receivables = Closing Accounts Receivables before adjustment -/+ Increase or decrease in Allowance for Doubtful Debts

Step 1: Closing Accounts Receivables before adjustment

Closing Accounts Receivables before adjustment is $170,000.

Step 2: Increase or decrease in Allowance for Doubtful Debts

The opening Allowance for Accounts Receivables is $9,800. The change in the Allowance for Doubtful Debts is calculated as follows:

Allowance for the Year = Closing Allowance calculated - Opening Allowance Value

Allowance for the Year = 10% of $170,000 - $9,800

Allowance for the Year = $17,000 - $9,800 = $7,200

Step 3: Net Accounts Receivables

By using the values calculated above:

Net Accounts Receivables = $170,000 + $7,200 = $177,200

Therefore, the balance of Allowance for Doubtful Accounts after adjustment is $177,200.

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