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    Solve: Recording Bad Debts

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    Question: At the end of 2007 Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2008, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.

    Questions:
    (a) Prepare the journal entry for Aramis Company to write off the Ramirez receivable.
    (b) What is the net realizable value of Aramis Company's accounts receivable before the write-off of the Ramirez receivable?
    (c) What is the net realizable value of Aramis Company's accounts receivable after the write-off of the Ramirez receivable?

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    Solution Preview

    (a) When receivables are written off, the accounts receivable account is credited to remove the receivables. The debit goes to the "Allowance account". The journal entry is:

    Allowance for ...

    Solution Summary

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