Question

At the end of 2020, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2021, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.a) Prepare the journal entry for Aramis Company to write off the Ramirez receivable

b) What is the net realizable value of Aramis Company's accounts receivable before the write off of the Ramirez receivable?


c) What is the net realizable value of Aramis Company's accounts receivable after the write off of the Ramirez receivable?

Answer 1

A.

Journal entry for write off the Ramirez receivable

Debit Allowance for doubtful Accounts $6,000

Credit Accounts receivables $6,000

B.

Net realizable Receivables (beginning balance)

= accounts receivable of $800,000 Less allowance for doubtful accounts of $40,000

Net realizable receivable = $760,000

C.

Net realizable Receivables (closing balance)

= accounts receivable of $800,000

Less adjustment for write off $6,000

Closing Accounts receivables balance $794,000

Less

Opening allowance for doubtful accounts of $40,000

Less debt write off $6,000

Closing allowance for doubtful account = $34,000

Closing Net realizable receivable = $760,000