Reference no: EM132569407

Question - Khyber Corporation follows generally accepted accounting principles in accounting for uncollectible. Zahid khan received notification from a bankruptcy court that its customer, Abid Ali, had been adjudicated and released from all claims presently pending against it by Khyber Corporation. Zahid Khan, owner of Khyber Corporation, was not at all pleased with this decision. Zahid had anticipated recovering at least Rs.50,000 from Abid Ali, and that balance remained in the Accounts Receivable accounts of Khyber Corporation. Because Khyber Corporation has no further remedies for collection, Zahid directed the accounting department to prepare journal entry to write off the account of Abid Ali.

Required -

(a) Prepare the journal entry to write off the Abid Ali account.

(b) Explain why the actual write-off will not result in a reduction of Khyber Corporation's income.

(c) Suppose Abid Ali recovered from its bankruptcy and eventually voluntarily paid the Rs. 50,000 "owed" to Zahid. Prepare Khyber Corporation 's journal entries to record the unexpected recovery.