Avia Company determines that a customer balance of $400 from Allia, Inc. is uncollectible. Avia uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a debit to:单项选择题
A
Cash
B
Bad Debts Expense
C
Accounts Receivable - Allia
D
Allowance for Doubtful Accounts

Question

Avia Company determines that a customer balance of $400 from Allia, Inc. is uncollectible. Avia uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a debit to:单项选择题

A

Cash

B

Bad Debts Expense

C

Accounts Receivable - Allia

D

Allowance for Doubtful Accounts

BlackTom AI · Accepted Answer

Under the allowance method, the write-off reduces the contra-asset account (Allowance for Doubtful Accounts) and removes the specific customer's receivable from Accounts Receivable.

1. Relevant knowledge points and concepts
- Allowance method: Bad debt expense is estimated in an earlier period and recorded by debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts (a contra-asset).
- Specific write-off: When a particular account (Allia, Inc.) is deemed uncollectible, the company writes it off by debiting the Allowance for Doubtful Accounts and crediting Accounts Receivable—removing the receivable without further hitting expense.
- Net effect: The write-off reduces both gross Accounts Receivable and the Allowance by the same amount, leaving net realizable value of receivables unchanged.

2. Complete step-by-step reasoning
- Identified uncollectible amount: $400 for Allia, Inc.
- Under allowance method, we do not record another Bad Debts Expense at write-off time.
- The proper journal entry: Debit Allowance for Doubtful Accounts $400; Credit Accounts Receivable—Allia $400.

3. Intermediate calculation/verification
- Let gross AR = G (includes Allia $400), allowance = A.
- After write-off: gross AR' = G − 400; allowance' = A − 400.
- Net AR' = (G − 400) − (A − 400) = G − A = Net AR before write-off (unchanged).
- Journal entry amounts: Debit Allowance for Doubtful Accounts $400; Credit Accounts Receivable—Allia $400.

4. Why the correct answer is correct
- The Allowance for Doubtful Accounts is a contra-asset previously credited when estimating bad debts; writing off a specific receivable requires debiting (reducing) that allowance to offset the removal of the receivable.

5. Why the other options are incorrect
- Cash: No cash is received or paid in a write-off, so Cash is not involved.
- Bad Debts Expense: Under the allowance method, expense was recorded earlier when the allowance was established; we do not debit expense again at write-off.
- Accounts Receivable—Allia: This account is credited (reduced) to remove the receivable, not debited.

6. Conclusion
The correct entry debits Allowance for Doubtful Accounts. This matches the provided correct answer: Allowance for Doubtful Accounts.

Avia Company determines that a customer balance of $400 from Allia, Inc. is uncollectible. Avia uses the allowance method to account for bad debts. The entry to write off the uncollectible balance will include a debit to:单项选择题

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