Josh & Jake decide to organize a partnership, J&J Landscaping. Josh contributes cash of $4,000, equipment with a cost of $10,000 and $3,000 of accumulated depreciation, and accounts receivable of $2,500. Josh & Jake agree that the equipment has a fair value of $6,000 and the accounts receivable have a net realizable value of $1,000. What is the amount recorded to accounts receivable and the allowance to doubtful accounts?

1 answer

The amount recorded to accounts receivable is $1,000 because it has a net realizable value of $1,000.

To calculate the allowance for doubtful accounts, we need to determine the difference between the accounts receivable's carrying value and its net realizable value. The carrying value is $2,500.

The difference between the carrying value and the net realizable value is $1,500 ($2,500 - $1,000).

Therefore, the allowance for doubtful accounts is $1,500.
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