On December 31, 2017, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $10,000. What amount would the company report as its net accounts receivable on December 31, 2017? Prepare the journal entry to write off the accounts on January 2, 2018. Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?

Answer and step-by-step explanation:

Step 1: Calculation of net accounts receivable on December 31, 2017

Net accounts receivable

= Accounts Receivable - Allowance for Doubtful Debts

= $800,000 - $55,000

= $745,000

The company shall report its net accounts receivable on December 31, 2017 as $745,000.

Step 2: Journal entry to write off the accounts:

                                                                                    Debit             Credit

2-Jan-2018      Allowance for doubtful debts            $10,000

                               Accounts receivable                                          $10,000

                        Writing off debts not collectible

Step 3: Calculation of net accounts receivable on January 3, 2018:

Net accounts receivable

= Accounts Receivable - Allowance for Doubtful Debts

= $790,000 - $45,000

= $745,000

The company shall report its net accounts receivable on January 3, 2018 as $745,000. The net accounts receivable has not changed from December 31, 2017 because the write-offs worth $10,000 were estimated and allowed for in 2017. Hence, the decrease in accounts receivable is offset by an equal decrease in the allowance for doubtful debts.

answer blank(1).(2); sharpe;