Question

Andler Inc. estimates that an allowance of $8,000 is required on its accounts receivable balance of $160,000 on December 31, 2020. Required a. What is the net realizable value of its accounts receivable on December 31, 2020? b. On February 1, 2021, the company determined that $2,000 of specific accounts receivable would be written off. Prepare the journal entry required to write-off these accounts. What is the net realizable value of ac- counts receivable after the write-off? c. On February 15, 2021, the company unexpectedly collected $500 of the accounts written off on February 1, 2021. Prepare the journal entries required upon collection of these accounts, What is the net realizable value of accounts receivable after the collection?

Answer 1

Solution a:

Net realizable value = Gross receivables - Allowance for doubtful accounts = $160,000 - $8,000 = $152,000

Solution b:

Journal Entries
Transaction	Particulars	Debit	Credit
1	Allowance for doubtful accounts Dr	$2,000.00
	To Accounts receivables		$2,000.00
	(To write off receivables)

Net realizable value = Gross receivables - Allowance for doubtful accounts = $158,000 - $6,000 = $152,000

Solution c:

Journal Entries
Transaction	Particulars	Debit	Credit
1	Accounts receivables dr	$500.00
	To Allowance for doubtful accounts		$500.00
	(To reinstate receivables)
2	Cash Dr	$500.00
	To Accounts receivables		$500.00
	(To record collection of receivables)

Net realizable value = $158,000 - $6,500 = $151,500