At the end of 2013, Morley Co. has accounts receivable of $727,500 and an allowa

ID: 2446573 • Letter: A

Question

At the end of 2013, Morley Co. has accounts receivable of $727,500 and an allowance for doubtful accounts of $25,900. 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 $4,580.

(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

(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

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Ans (a)

Bad Debt A/c Dr. $4580

To Spears Inc. $4580

Allowance for Doubtful Account Dr. $4580

To Bad Debts A/c $ 4580

Ans (b)

Perticulars

Before

After

Accounts Receivable

727500

Less : Allowance for Doubtful Account

25900

4580

Cash Realizable value of Account receivable

701600

706180