PrintOnCollins Ltd follows the allowance method for accounting for bad and doubtful debts. Upon receiving notification that their customer, Margarita Lilianas, who had an outstanding balance of $3,440, has gone into liquidation, the company decides to write off the amount as a bad debt. What is the correct journal entry to record this write-off?

Question

BlackTom AI · Accepted Answer

Under the allowance method, specific uncollectible receivables are removed from the books by using the contra-asset allowance account rather than recognizing a new expense at the time of write-off. This preserves the matching principle because the estimated bad‑debt expense was already recognized in an earlier period when the allowance was established.

1. Relevant knowledge points and concepts
- Accounts receivable is an asset; Allowance for doubtful debts is a contra-asset that reduces receivables.
- Under the allowance method, bad‑debt expense is estimated and recorded before individual accounts are identified as uncollectible.
- When a specific customer balance is confirmed uncollectible, the journal entry debits the Allowance for doubtful debts and credits Accounts receivable (to remove the receivable and use up the prior allowance).

2. Step‑by‑step reasoning process
- Margarita Lilianas has an outstanding receivable of $3,440 and has gone into liquidation → her balance is uncollectible.
- Because PrintOnCollins uses the allowance method, the expected loss should already be in the Allowance account. To write off her specific receivable, reduce (debit) the Allowance and remove (credit) the Accounts receivable.

3. Intermediate steps / amounts
- Debit Allowance for doubtful debts: $3,440 (reduces the contra‑asset by the amount reserved).
- Credit Accounts receivable: $3,440 (removes the specific customer balance from assets).

4. Why the correct answer is correct
- This entry eliminates the receivable from the balance sheet and applies the previously recorded allowance against the specific loss. No additional expense is recorded at the time of write‑off because expense recognition occurred when the allowance was set up.

5. Why the other options are incorrect
- DR Allowance; CR Bad debts expense: Credits to expense would improperly decrease expense and does not remove the receivable.
- DR Bad debts expense; CR Accounts receivable: This is the direct write‑off method entry, not appropriate under the allowance method (and would recognize expense in the wrong period).
- DR Bad debts expense; CR Allowance for doubtful debts: This would record additional expense at write‑off rather than using the existing allowance; only used if allowance is insufficient and an adjusting entry is required.

6. Conclusion / confirmation
- The correct journal entry is: DR Allowance for doubtful debts $3,440; CR Accounts receivable $3,440, which matches the provided answer.

类似问题

If a company debits Allowance for doubtful accounts and credits Accounts receivable it is recording the Blank ______.

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:

Use this information for questions 7 - 10 During the next month, 31 July 20X2, an $27300 account receivable is written off as uncollectable. Prepare the journal entry to record the write-off. Ignore GST.

Which of the following trees corresponds to a potential parse of the ambiguous sentence below, with correct syntactic categories? Some diagnostics are provided.

Which of the following sentences contain two non-finite verbs? Select all that apply.

Analyze the following sentence: The sentence contains [ Select ] 8 6 5 7 3 4 functional words, [ Select ] 2 3 1 4 5 count nouns, [ Select ] 4 5 2 1 3 mass nouns, and [ Select ] 1 5 2 3 4 adjectives.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单