Question

At the end of 2019, Splish Brothers Inc. has accounts receivable of $778,100 and an allowance for doubtful accounts of $63,200. On January 24, 2020, the company learns that its receivable from Megan Gray is not collectible, and management authorizes a write-off of $7,400.

1) Prepare the journal entry to record the write-off.

2) What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off?

Answer 1

1.

Accounts receivable = $778,100

Allowance for doubtful accounts = $63,200

Accounts receivable written off = $7,400

General Journal	Debit	Credit
Allowance for doubtful accounts	$7,400
Accounts receivable		$7,400

2.

Cash realized value of accounts receivable before write off = Accounts receivable- Allowance for doubtful accounts

= 778,100-63,200

= $714,900

Accounts receivable after $7,400 accounts receivable written off =  Accounts receivable- Accounts receivable written off

= 778,100-7,400

= $770,700

Allowance for doubtful accounts after $7,400 accounts receivable written off = Allowance for doubtful accounts- Accounts receivable written off

= 63,200-7,400

= $55,800

Cash realizable value of accounts receivable after write off = Accounts receivable after $7,400 accounts receivable written off- Allowance for doubtful accounts after $7,400 accounts receivable written off

= 770,700-55,800

= $714,900

Kindly comment if you need further assistance. Thanks