4. The Accounts Receivable balance for Risch, Inc. at the end of 2005, was $44,500. Rich had credit sales for the year of $325,000. During 2005, Rich wrote-off a $3,000 uncollectable account. Rich estimates that 2% of sales will not be collected. Rich had a beginning balance in the Allowance for Doubtful Accounts of $3,500. Risch uses the allowance method of accounting for bad debts.

(a.) Calculate the change in the balance in the Allowance for Doubtful Accounts after the year end adjustment.

(b.) Assume that on January 1, 2006, Risch collects on the account written-off in 2005.

Prepare the journal entries to record the collection.

(c.) What is the net book value of accounts receivable after the collection in 2006?