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 Bad Debt Expense Doubtful Accounts c. debit Sales Returns and Allowance; credit Accounts Receivable d. debit Bad Debt Expense; credit Accounts Receivable

Answer 1

Answer:

d. Debit Bad Debt Expense; Credit Accounts Receivable

Explanation:

This would be the entry needed to write-off this account. This is an example of the direct write-off method of accounting. This is a method that is employed to recognize bad debts expense that arises from credit sales. This method does not permit allowance account. Instead, an account receivable is written-off directly to expense after the account is determined uncollectible.