Question

Blazer Company has outstanding Accounts Receivables of $1,000,000 on December 31 based on Credit Sales of $3,000,000 for the year. Rich Carvajal, Chief Accountant at Blazer, estimates that 5% of their receivables will be uncollectible. He also determines that the Allowance for Doubtful Accounts has a $7,000 credit balance on December 31 prior to any adjustments. On March 1, Blazer determines that a $5,000 account owed by GTech Corp will be uncollectible.

If Blazer uses the Allowance Method to account for bad debts based on percent of receivables, their March 1 entry to dispose of GTech's uncollectible account will include which of the following?

5000 debit to bad debt expense

5000 credit to bad debt expense

5000 debit to account receivable - Gtech

43000 credit to allowance for doubtful accounts

some other answer

Answer 1

• Under Allowance account, when ‘Allowance for doubtful account’ is used, the final actual write off of the account receivables is recorded by:
  Debiting the Allowance for doubtful accounts, and
  Crediting the Accounts receivables.
• None of the Option choice MATCH with the above journal entry requirement.
• Hence, Correct Answer = Option #5
  “Some other answer”.
• Correct entry would be:
  [Debit] Allowance for Doubtful account $ 5000
  [Credit] Accounts receivables $ 5000