Question

Dalton Company uses the allowance method to account for uncollectible receivables. Dalton has determined that the Irish Company account is uncollectible. To write-off this account, Dalton should debit A. Bad Debt Expense and credit Accounts ReceivableB. Bad Debt Expense and credit Allowance for Doubtful AccountsC. Allowance for Doubtful Accounts and credit Accounts ReceivableD. Accounts receivable and credit Allowance for Doubtful Accounts

Answer 1

Answer:

C. Debit Allowance for Doubtful Accounts and credit Accounts Receivable

Explanation:

To write-off an account under the allowance method, the company will decrease both, the allowance and the receivables. This will leave the net receivable at the same value before the write-off. It will have no impact on the net income as the account used are an asset account and contra-asset account.

The company will never write-off against bad debt expense under the allowance method. That is done in the direct method.