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At the end of 2016, Sheridan Company has accounts receivable of $665,400 and an allowance for doubtful accounts of $23,480. On January 24, 2017, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,415.​
(a) Prepare the journal entry to record the write-off. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
(b) What is the cash realizable value of the accounts receivable before the write-off and after the write-off?

Answer :

a) Journal entry of write off :

Date account titles and explanation debit credit

 Allowance for doubtful accounts 4415  

     Account receivable   4415

 (To record amount write off)    

b) Calculate cash realizable value :

Before write off After write off

Account receivable 665400 (665400-4415)=660985

Less: Allowance for doubtful accounts (23480) (23480-4415) = (19065)

Cash realizable value 641920 641920

What is Cash realizable value?

The amount of cash left over after deducting the uncollectible amount from an account receivable is known as the cash realisable value. The balance of accounts receivable and the allowance for doubtful accounts on a company's balance sheet are combined to yield this net amount.

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