Question

At December 31, 2008, Attwood Company reported Accounts Receivable of $34,000 and Allowance for Doubtful Accounts of $3,500. On January 7, 2009, Brady Enterprises declares bankruptcy and it is determined that the receivable of $1,200 from Brady is not collectible. 1. What is the cash realizable value of Accounts Receivable at December 31, 2008? 2. What entry would Attwood make to write off the Brady account? 3. What is the cash realizable value of Accounts Receivable after the Brady account is written off?

Answer 1

1.

Accounts receivable balance	$ 34,000
Less: Allowance for doubtful accounts	$ (3,500)
Net realizable accounts receivable value	$ 30,500

2.

Allowance for doubtful accounts	$ 1,200
Accounts receivable		$ 1,200

3.

Accounts receivable balance ($34,000-$1,200)	$ 32,800
Less: Allowance for doubtful accounts ($3,500-$1,200)	$ (2,300)
Net realizable accounts receivable value	$ 30,500

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