Question - Recording Bad Debts
At the end of 2012 Sorter Company has accounts receivable of $900,000 and an allowance for doubtful accounts of $40,000. On January 16, 2013, Sorter Company determined that its receivable from Ordonez Company of $8,000 will not be collected, and management authorized its write-off.
(a) Prepare the journal entry for Sorter Company to write off the Ordonez receivable.
(b) What is the net realizable value of Sorter Company's accounts receivable before the write-off of the Ordonez receivable?
(c) What is the net realizable value of Sorter Company's accounts receivable after the write-off of the Ordonez receivable?