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At the end of 2020, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2021, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.

Respuesta :

Answer:

Allowance for doubtful debt  Dr $6000

                        Account receivable   Cr $6000

Explanation:

The entry for recording receivable and creating an allowance for doubtful debt is;

Account receivable  Dr $800000

          Allowance for doubtful debt  Cr  $800000

Account receivable is an asset account and allowance for doubtful debt is a contra account meant to decrease/reduce the receivable account. Therefore when a doubtful debt is confirmed to be not received, bad debt expense is charged to the Profit & loss account and the above entry is reversed to reflect it's impact.

The entry to write-off the receivable from Ramirez company is;

Allowance for doubtful debt  Dr $6000

                        Account receivable   Cr $6000

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