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At the end of 2016, Concord Corporation has accounts receivable of $704,700 and an allowance for doubtful accounts of $26,850. 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 $4,384. 1. Prepare the journal entry to record the write-off. 2. What is the cash realizable value of the accounts receivable before the write off and after the write off?

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Answer:

1.

Debit Allowance for doubtful accounts $4,384

Credit Accounts receivable $4,384

2.

The cash realizable value of the accounts receivable:

Before the write off: $677,850

After the write off: $677,850

This is the same value

Explanation:

1. Madonna Inc. authorizes a write-off of uncollectible receivable, the company makes the entry to reduce the balances in the Allowance for Doubtful Account  and Acccounts Receivable. The journal entry:

Debit Allowance for doubtful accounts $4,384

Credit Accounts receivable $4,384

2.

Cash realizable = Accounts receivable (balance)- Allowance for doubtful accounts (balance)

Before the write off,

Cash realizable = $704,700 - $26,850 = $677,850

After the write off:

The balance of Accounts receivable = $704,700 - $4,384 = $700,316

The balance of Allowance for doubtful accounts = $26,850 - $4,384=$22,466

Cash realizable = $700,316 - $22,466 = $677,850

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