Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for this transaction under the allowance method would include:
A) a debit to Bad Debts Expense.
B) a credit to Bad Debts Expense.
C) a credit to Allowance for Doubtful Accounts.
D) a debit to Allowance for Doubtful Accounts.

Question

Quizplus · Accepted Answer

Under the allowance method, when a specific account is deemed uncollectible and is written off, the entry includes a debit to Allowance for Doubtful Accounts (reducing the allowance) and a credit to Accounts Receivable (reducing the receivable balance). This entry does not affect the Bad Debts Expense account directly at the time of the write-off.

Open Range Foods Writes Off a Bad Debt of $400