Question

Dexter Company applies the direct write-off method in accounting for uncollectible accounts. March 11 Dexter determines that it cannot collect $45,000 of its accounts receivable from its customer Leer Company. 29 Leer Company unexpectedly pays its account in full to Dexter Company. Dexter records its recovery of this bad debt. Prepare journal entries to record the above selected transactions of Dexter.

Answer 1

Answer:

bad debt expense   45,000 debit

  account receivable             45,000 credit

--to record write-off of Leer account--

account receivable             45,000 debit

      bad debt expense                     45,000 credit

--to record recovery of Leer account--

cash                     45,000 debit

  account receivable             45,000 credit

--to record collectiong from Leer account--

Explanation:

As it applies direct method when a write-off occurs It decrease the A/R and declares the bad debt expense for the full amount.

If the account is recovered, we reverse the entry and proceed to record the collection like a normal entry.