The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following?
A) debit Allowance for Doubtful Accounts; credit Accounts Receivable
B) debit Sales; credit Accounts Receivable
C) debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D) debit Bad Debt Expense; credit Accounts Receivable

Question

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following? ​
A) debit Allowance for Doubtful Accounts; credit Accounts Receivable
B) debit Sales; credit Accounts Receivable
C) debit Bad Debt Expense; credit Allowance for Doubtful Accounts
D) debit Bad Debt Expense; credit Accounts Receivable

Quizplus · Accepted Answer

The entry to write off a customer's uncollectible account using the direct write-off method is to debit Bad Debt Expense and credit Accounts Receivable. This reduces the Accounts Receivable balance and recognizes the expense of the uncollectible account. Choice A is incorrect because it only adjusts the Allowance for Doubtful Accounts, which is a contra asset account that is used with the allowance method, not the direct write-off method. Choice B is incorrect because it adjusts Sales, which is not affected by the write-off of an uncollectible account. Choice C is incorrect because it adjusts both Bad Debt Expense and the Allowance for Doubtful Accounts, which is not necessary under the direct write-off method.