E7-8 (Recording Bad Debts) At the end of 2007 Aramis Company has accounts receivable of $800,000 and
an allowance for doubtful accounts of $40,000. On January 16, 2008, Aramis Company determined that its receivable
from Ramirez Company of $6,000 will not be collected, and management authorized its write-off.

Instructions

(a) Prepare the journal entry for Aramis Company to write off the Ramirez receivable.
(b) What is the net realizable value of Aramis Company’s accounts receivable before the write-off of
the Ramirez receivable?
(c) What is the net realizable value of Aramis Company’s accounts receivable after the write-off of
the Ramirez receivable?