Prepare the journal entries to record this transaction

At the end of 2004, Searcy Hotel has accounts receivable of $700,000 and an allowance for doubtful accounts of $54,000. On January 24, 2005, the company learns that its receivable from Hunt Inc. is not collectible, and management authorizes a write-off of $7,000.

(a) Prepare the journal entry to record the write-off.

(b) What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off?

(c) On March 4, 2005, Searcy Hotel receives payment of $7,000 in full from Hunt Inc. Prepare the journal entries to record this transaction.

Solution:

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