Question

When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would

Answer 1

Answer:

Increase the allowance for doubtful accounts.

Explanation:

It would increase the allowance for doubtful accounts because, if you determine the necessary journal entries for reestablishment and to collect the account receivables, what we get is depicted below:

Reestablishment entry:

Account receivables = xx

Doubtful accounts allowance = xx

On the other hand, we get the record collection entry:

Record Collection Entry:

Cash = xx

Accounts receivable = xx

From the above, the net effect is simply an increase in current asset account; CASH, and a corresponding increase in the allowance for doubtful accounts.