Question

During Year 1, Kylie Department Store had total sales of $1,500,000, of which 60% were on credit. During the year, $500,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $82,500. The beginning balance in the Allowance for Bad Debts (on January 1 of Year 1) was $10,000. The amount of accounts written off as uncollectible during the year was $13,500.

Management uses the percentage of sales method and estimates that 4% of credit sales will ultimately be uncollectible. Which ONE of the following is included in the summary journal entry necessary during the year to record the write off of the $13,500 in verified uncollectible accounts?

Group of answer choices

DEBIT to Bad Debt Expense for $13,500

CREDIT to Bad Debt Expense for $13,500

DEBIT to Cash for $13,500

CREDIT to Cash for $13,500

DEBIT to Accounts Receivable for $13,500

DEBIT to Allowance for Bad Debts for $13,500

Answer 1

The journal entry necessary during the year to record the write off of the $13,500 in the verified uncollectible account is

DEBIT Bad Debt Expense for $13,500

CREDIT Accounts Receivable for $13,500

Note

• Initially, we will record a receivable balance at the time of credit sale.
• Then subsequently we are knowing that, the receivable balances are uncollectable, it means they are no more receivable. and should be cancelled from the receivable balance
• As we know receivable is an asset balance, when reducing asset we have to CREDIT
• And also the entities expense are increasing, so we have to DEBIT an extra expense in the name of BAD DEBT EXPENSE