**Example Question and Exercise: Understanding Write-Offs and Cash Realizable Value****Prepare entry for write-off, and determine cash realizable value.****BE8.4 (LO 2), AP:** At the end of 2021, Safer Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $25,000. On January 24, 2022, it is learned that the company receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,300.a. Prepare the journal entry to record the write-off.b. What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off?**Prepare entries for collection of customer account write-off.***Explanation:*In this exercise, students are asked to understand and process how companies handle uncollectible accounts by writing them off. It begins with determining the initial accounts receivable and allowances, then adjusting for known uncollectible accounts. Students will learn to prepare a journal entry for these write-offs and calculate the changes in cash realizable value before and after these adjustments. The task involves the application of accounting principles related to accounts receivable and the allowance method.

Accounts receivables are part of the assets representing the amount to be collected for credit sales made earlier. Part a) Prepare the journal entries as follows:Part b) Calculate cash realizable value as follows: Cash realizable value (Before)=Accounts Receivables-Allowance for Doubtful Accounts=$700,000-$25,000=$675,000 Cash realizable value (After)=(Accounts Receivables-Write off)-(Allowance for Doubtful Accounts-Write off)=($700,000-$4,300)-($25,000-$4,300)=$695,700-$20,700=$675,000

Business

Accounting

Prepare entry for write-off, and determine cash realizable value. BE8.4 (LO 2), AP At the end of 2021, Safer Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $25,000. On January 24, 2022, it is learned that the com receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4.300. a. Prepare the journal entry to record the write-off. b. What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off?

Prepare entry for write-off, and determine cash realizable value. BE8.4 (LO 2), AP At the end of 2021, Safer Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $25,000. On January 24, 2022, it is learned that the com receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4.300. a. Prepare the journal entry to record the write-off. b. What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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