At the end of 2017, Ayayai Corp. has accounts receivable of $1.4 million and an allowance...
At the end of 2017, Ayayai Corp. has accounts receivable of $1.4 million and an allowance for doubtful accounts of $85,000. On January 16, 2018, Ayayai determined that its $17,000 receivable from Blossom Company will not be collected, and management has authorized its write off. On January 31, 2018, Ayayai received notification that the company will be receiving $0.15 for every $1.00 of accounts receivable relating to Sunland Company The company had previously written off 100% of the amount due from Sunland ($55,000).
Prepare the journal entry for Ayayai Corp. to write off the Blossom receivable and any journal entry necessary to reflect the notice regarding Sunland Company
What is the estimated net realizable value of Ayayai’s accounts receivable before and after the entries above? What is the book value of Ayayai’s accounts receivable before and after the entries above?
Homework Answers
| Journal entries: | ||||||||||||
| Date | Account titles and explanation | Debit | Credit | |||||||||
| 2018 | ||||||||||||
| Jan 16. | Allowance for doubtful accounts | 17000 | ||||||||||
| Accounts receivable | 17000 | |||||||||||
| (Accounts receivable written-off) | ||||||||||||
| Jan 31. | Accounts receivable | (55000*0.15) | 8250 | |||||||||
| Allowance for doubtful accounts | 8250 | |||||||||||
| (Accounts receivable written-off reversed) | ||||||||||||
| Book value of accounts receivables: | ||||||||||||
| Before entry | ||||||||||||
| Book value of accounts receivables=$1400000 | ||||||||||||
| After entry | ||||||||||||
| Book value of accounts receivables=1400000-17000+8250=$ 1391250 | ||||||||||||
| Net realizable value of accounts receivable=Book value of accounts receivable-Book value of allowance for doubtful accounts | ||||||||||||
| Before entry | ||||||||||||
| Net realizable value of accounts receivable=1400000-85000=$ 1315000 | ||||||||||||
| After entry | ||||||||||||
| Book value of accounts receivables=$ 1391250 | ||||||||||||
| Book value of Net realizable value=85000-17000+8250=$ 76250 | ||||||||||||
| Net realizable value of accounts receivable=1391250-76250=$ 1315000 | ||||||||||||
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