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 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:
|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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from Financial Accounting: Homework Help ResourceChapter 3 / Lesson 20