Question

At the end of 2021, Worthy Co.’s balance for Accounts Receivable is $11,000, while the company’s total assets equal $1,410,000. In addition, the company expects to collect all of its receivables in 2022. In 2022, however, one customer owing $2,600 becomes a bad debt on March 14.
1. Record the write off of this customer’s account in 2022 using the direct write-off method. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:Worthy journal $

Date

March 14, 2022

Bad debt Dr 2600

Receivable Cr 2600

Narration. Record of receivables written off to income account on account becoming unrecoverable.

Explanation:

The direct method of written off bad debts do not make provision for estimate of receivables that are likely to go bad in which the estimate is recognised as debit to income statement and the corresponding credit entry is used to reduce the receivables, with adjustment been made at the year end for variances.

In the direct method the actual bad debts is debited in the income s statement and credited to the receivables accounts.