Question

The following information is available about a company's accounts receivable: June 30 - Accounts receivable balance: $50,000. Nov 15 - Received Cash of $40,000, and wrote off the remaining balance. Dec 15 - Recovered the amount written off on Nov 15. Under the direct method, the entry to write-off the uncollectible amount on Nov 15 is: Select one:

A. Debit Bad Debt Expense $10,000; Credit Accounts Receivable $10,000

B. Credit Accounts Receivable $10,000; Debit Bad Debt Expense $10,000

C. Debit Bad Debt Expense $40,000; Credit Accounts Receivable $40,000

D. Debit Bad Debt Expense $50,000; Credit Accounts Receivable $50,000

Answer 1

	The option A is the correct answer
	Closing Journal Entries
	Date	Dr/Cr	Particulars	Debit $	Credit $
	Nov 15	Debit	Bad Debt Expenses	10,000
		Credit	Accounts Receivable		10,000
			(To record bad debt expenses to accounts receivable directly)
	Under the direct method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined to be uncollectible