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 entries to record the cash recovered on Dec 15 are:

Select one:

A. 1. Debit Accounts Receivable, Credit Bad Debt Expense for $10,000; 2. Debit Cash, Credit Accounts Receivable for $10,000.

B. 1. Credit Accounts Receivable, Debit Bad Debt Expense for $10,000; 2. Credit Cash, Debit Accounts Receivable for $10,000.

C. . Debit Accounts Receivable, Credit Bad Debt Expense for $40,000; 2. Debit Cash, Credit Accounts Receivable for $40,000

D.  1. Credit Accounts Receivable, Debit Bad Debt Expense for $40,000; 2. Credit Cash, Debit Accounts Receivable for $40,000.

Answer 1

Out of the accounts receivable of $50,000,$40,000 cash was received and $10,000 was written off.

Hence, on November 15,Bad debt expense would have been debited by $10,000 and accounts receivable would have been credited by$10,000.

Hence, on December 15,when cash is recovered, following two entries would be made:

Date	General Journal	Debit	Credit
December 15	Accounts receivable	$10,000
	Bad debt expense		$10,000
December 15	Cash	$10,000
	Accounts receivable		$10,000

Correct option is A.

  

The first entry would be made to reinstate the account receivable and the second entry for the actual cash received from accounts receivable.

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