Question

In 20X1, Judie Co. had total sales of $250,000, of which 75% were on credit. During the year, $175,000 cash was collected on credit sales. The beginning balance in Accounts Receivable (on January 1 of Year 1) was $30,000. The beginning balance in the Allowance for Doubtful Accounts (on January 1 of Year 1) was $10,000. The amount of accounts written off as uncollectible during the year was $17,000. -- Management uses the percentage of credit sales method and estimates that 6% 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 $17,000 in verified uncollectible accounts?

		DEBIT to Bad Debt Expense for $17,000
		DEBIT to Accounts Receivable for $17,000
		DEBIT to Allowance for Doubtful Accounts for $17,000
		DEBIT to Cash for $17,000
		CREDIT to Bad Debt Expense for $17,000
		CREDIT to Cash for $17,000

Answer 1

Accounts receivable written off during the year = $17,000

Under the allowance method, when an accounts receivable is written off, balance in both allowance for doubtful accounts and accounts receivable decreases. Thus, to write off an accounts receivable, Allowance for doubtful accounts is debited and accounts receivable is credited. Thus , to wrte off $17,000 of accounts receivable, following entry would be made :

Journal

Account Title and Explanation	Debit	Credit
Allowance for doubtful accounts	17,000
Accounts receivable		17,000
(To record write off of accounts receivable)

Third option is the correct option

Other information given in the question is not relevant here, hence ignored.