33. A company has the following: Trade accounts receivable: $500,000, Long-term notes receivable: $750,000, Allowance for doubtful accounts: $10,000. Which amount should this company report as net receivables under the current asset section of the balance sheet?
Answer: A
The company should report net receivables as $490,000.
To calculate net receivables, the company must subtract the allowance for doubtful accounts from the trade accounts receivable. Thus, the net receivables are calculated as $500,000 - $10,000, resulting in $490,000.
A) $490,000
Option A is correct as it accurately reflects the calculation of net receivables by taking the trade accounts receivable of $500,000 and subtracting the allowance for doubtful accounts of $10,000, leading to a total of $490,000.
B) $760,000
Option B is incorrect because it does not account for the allowance for doubtful accounts. The figure $760,000 seems to sum the long-term notes receivable with other assets, which is irrelevant to the net receivables calculation.
C) $510,000
Option C is also incorrect. This amount results from incorrectly adding the allowance for doubtful accounts instead of subtracting it from the trade accounts receivable. The correct computation involves subtraction, not addition.
D) $750,000
Option D is incorrect because it fails to consider the allowance for doubtful accounts. This amount represents the long-term notes receivable alone and does not reflect the net receivables, which specifically pertains to current assets.
Conclusion
The correct net receivables amount of $490,000 is derived from properly accounting for the allowance for doubtful accounts against trade accounts receivable. Options B, C, and D misinterpret the calculation by either failing to subtract the allowance or incorrectly representing other asset figures. Hence, Option A is the only accurate choice reflecting net receivables.