Question

At the end of 2016, Nash's Trading Post, LLC has accounts receivable of $635,600 and an allowance for doubtful accounts of $23,140. On January 24, 2017, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,210.(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?

Answer 1

Answer:

The computation and journal entry is shown below.

Explanation:

According to the scenario, the computation of the given data are as follows:

(a). The journal entry are as follows:

Allowance for doubtful A/c Dr.   $4,210

To Accounts Receivable A/c   $4,210

(Being the amount write off is recorded)

(b). Cash realizable value before write off can be calculated as follows:

Cash realizable value before write off = Receivable balance - Doubtful A/c Allowance

By putting the value, we get

Cash realizable value before write off  = $635,600 - $23,140

= $612460

And ash realizable value after write off can be calculated as follows:

Cash realizable value before write off = ($635,600 - $4,210)- ($23,140 - $4,210)

= $612,460