Nigel Lighting uses the direct charge-off method of recording bad debts.On Sept.4,the $300 account balance of Louis Blue was charged off.However,on November 15,Blue paid $70 of the amount previously written off.The entry to record the payment from Blue would include:
A) debit Accounts Receivable $300;credit Uncollectible Account Expense $300
B) debit Allowance for Doubtful Accounts $70;credit Accounts Receivable $70
C) debit Uncollectible Account Expense $70;credit Cash $70
D) debit Cash $70;credit Accounts Receivable $70

Question

Quizplus · Accepted Answer

Since Nigel Lighting uses the direct charge-off method, the initial entry to record the write-off of Louis Blue's $300 account balance would be:

Debit Uncollectible Account Expense $300
Credit Accounts Receivable $300

When Louis Blue pays $70 on November 15, the entry to record the payment would be:

Debit Cash $70
Credit Accounts Receivable $70

This is because the amount previously written off was $300 and the payment received was only $70, so the remaining balance of $230 is still uncollectible and should not be added back to Accounts Receivable. Choice D correctly reflects this entry.

Nigel Lighting Uses the Direct Charge-Off Method of Recording Bad