You have just received notice that a customer with an Accounts Receivable balance of $500 has gone bankrupt and will not make any future payments.Assuming you use the allowance method for uncollectible accounts, the entry you make is to
A)debit Allowance for Doubtful Accounts and credit Bad Debts Expense.
B)debit Allowance for Doubtful Accounts and credit Accounts Receivable.
C)debit Bad Debts Expense and credit Allowance for Doubtful Accounts.
D)debit Bad Debts Expense and credit Accounts Receivable.

Question

Quizplus · Accepted Answer

When using the allowance method, writing off an account receivable due to bankruptcy involves debiting the Allowance for Doubtful Accounts and crediting Accounts Receivable. This action removes the receivable from the books and reduces the allowance account, without affecting the income statement.

You Have Just Received Notice That a Customer with an Accounts