Question

i need explanation why here we subtract only the

((((Amounts estimated to be uncollectible?))))

why not subtracting also (((Allowance for doubtful accounts (per books) ?))))

2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2015, disclosed the following Amounts estimated to be uncollectible Accounts receivable Allowance for doubtful accounts (per books) $ 180,000 1,750,000 125,000

Answer 1

As per US GAAP we need to report the accounts receivable being a current assets at its realizable value, which is after netting of uncollectible accounts receivable. Uncollectable accounts receivable is measured using one of the method called allowance for uncollectible accounts. At the end of every year company estimates the amount that will become uncollectible and net off the accounts receivable balance. In the given case allowance for doubtful accounts is reported as per books which are before estimation of year end uncollectible accounts as amount estimated to be uncollectible is more than that of allowance for doubtful accounts as per books. Hence we need to reduce the amount estimated to be uncollectible form accounts receivable at year-end balance sheet date.