Question

At the end of 2021, Marin Co. has accounts receivable of $754,500 and an allowance for doubtful accounts of $23,960. On January 24, 2022, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,624.

a)

Prepare the journal entry to record the write-off. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Enter an account title	Enter a debit amount	Enter a credit amount
Enter an account title	Enter a debit amount	Enter a credit amount

(b)

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

		Before Write-Off		After Write-Off
Cash realizable value		$Enter a dollar amount		$Enter a dollar amount

Answer 1

Journal entry to record write-off
Account titles and Explanation	Debit	Credit
Allowance for doubtful accounts	$4,624
Accounts receivable		$4,624
(To record write off of accounts receivable)
Explanation: Account written off under allowance method is removed from allowance account as well as accounts receivable account.
Allowance for doubtful account being contra asset account is debited for decrease in balance and accounts receivable being asset account is credited for decrease in balance.
b.
Calculation of cash realizable value before write-off
Accounts receivable	$754,500
Less: Allowance for doubtful accounts	$23,960
Cash realizable value	$730,540
Calculation of cash realizable value after write-off
Accounts receivable (754500-4624)	$749,876
Less: Allowance for doubtful accounts (23960-4624)	$19,336
Cash realizable value	$730,540
Thus, the cash realizable value before and after write off would remain same.