At the end of 2013, Morley Co. has accounts receivable of $897,300 and an allowance for doubtful...

Question:

At the end of 2013, Morley Co. has accounts receivable of $897,300 and an allowance for doubtful accounts of $25,780. On January 24, 2014, it is learned that the company's receivable from Spears Inc. is not collectible and therefore management authorizes a write-off of $4,260.

(a) Prepare the journal entry to record the write-off.

(b) What is the cash realizable value of the accounts receivable before the write-off and after the write-off?

Accounts Receivable:

Accounts receivable refers to a claim which is legally held by the business for the supply of goods and services to the customers and the payment of which has still not been received.

Answer and Explanation:

Date Particulars Debit ($) Credit($)
24th Jan.,2014 Allowance for doubtful A/c 4,300
To accounts receivable A/c 4,300
(Being bad debts written off for Morley Co. )


Particulars Before write off After write off
Accounts Receivable (7,00,000 - 4,300) 7,00,000 6,95,700
less: Allowance for doubtful debts ( 25,000 -4,300) 25,000 20,700
Cash realized value for accounts receivable 6,75,000 6,75,000

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Accounts Receivable Journal Entries

from Financial Accounting: Homework Help Resource

Chapter 3 / Lesson 20
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