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Marizza181 [45]
3 years ago
15

At the end of 2021, Kingbird Co. has accounts receivable of $762,000 and an allowance for doubtful accounts of $22,520. On Janua

ry 24, 2022, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,398.
(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?
Business
1 answer:
mixer [17]3 years ago
6 0

Answer:

a. Debit Allowance for doubtful debt $4,398

   Credit Accounts receivable $4,398

   Being entries to write off receivable due from Madonna Inc.

b. $739,480  before and after the write-off

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

The realizable value of accounts receivable before the write off is the net of the accounts receivable and the allowance for doubtful debt

=  $762,000 - $22,520

= $739,480

This amount remains the same after the write off as the write off will reduce the balances in both the allowance for doubtful debt account and accounts receivable.

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