On December 31, 2014, Extreme Fitness has adjusted balances of $900,000 in Accou

Question

On December 31, 2014, Extreme Fitness has adjusted balances of $900,000 in Accounts Receivable and $75,000 in Allowance for Doubtful Accounts. On January 2, 2015, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $20,000. What amount would the company report as its net accounts receivable on December 31, 2014? Prepare the journal entry to write off the accounts on January 2, 2015. Assuming no other transactions occurred between December 31, 2014, and January 3, 2015, what amount would the company report as its net accounts receivable on January 3, 2015? Has Net Accounts Receivable changed from December 31, 2014?

Explanation / Answer

The company reports as its net accounts receivable on dcember 31, 2014 is = $ 8,25,000 (9,00,000 - 75,000)

(account receivable - Allowances doubtfull accounts)

The journal entry for write off the accounts on Jan 2, 2015

Debit credit

Allowance for doubtful Accounts $20,000

To Account Receivable a/c $ 20,0000

The amount would company report its accounts as on january 3, 2015 is = $ 8,25,000 *

*(9,00,000-20,000= 8,80,000 - 55,000 *= 8,25,000)

* 75,000 -20,000= 55,0000

(account receivable - Allowances doubtfull accounts)

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