E7-8B (Recording Bad Debts) At the end of 2014 Sanchez Company has accounts receivable of $400,000 and an allowance for doubtful accounts of $20,000.

E7-8B (Recording Bad Debts) At the end of 2014 Sanchez Company has accounts receivable of $400,000 and an allowance for doubtful accounts of $20,000. On January 16, 2015, Sanchez Company determined that its receivable from Maximillan Company of $3,000 will not be collected, and management authorized its write-off.

Instructions

(a) Prepare the journal entry for Sanchez Company to write off the Maximillan receivable.

(b) What is the net realizable value of Sanchez Company’s accounts receivable before the write-off of the Maximillan receivable?

(c) What is the net realizable value of Sanchez Company’s accounts receivable after the write-off of the Maximillan receivable?