Question

Carrington Company uses the allowance method for recording bad debts. On February 1, Carrington wrote off a $3,500 customer account balance when it became clear that the particular customer would never pay. On May 29, Carrington unexpectedly received a check for $3,500 from the customer. On May 29, Carrington will: A. Debit Allowance for Doubtful Accounts and credit Accounts Receivable for $3,500; debit Cash and credit Bad Debt Expense for $3,500. B. Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,500; debit Cash and credit Accounts Receivable for $3,500. C. Debit Accounts Receivable and credit Allowance for Doubtful Accounts for $3,500; debit Cash and credit Accounts Receivable for $3,500. D. Debit Cash and credit Bad Debt Expense for $3,500; debit Accounts Receivable and credit Allowance for Doubtful Accounts for $3,500.

Answer 1

Answer:

C. Debit Accounts Receivable and credit Allowance for Doubtful Accounts for $3,500; debit Cash and credit Accounts Receivable for $3,500.

Explanation:

The journal entry is given below:

Account receivable Dr $3,500

       To allowance for doubtful debts $3,500

(being the account receivable is recorded)

Here account receivable is debited as it increased the assets and credited the allowance as it decreased the assets

Cash dr $3,500

   To account receivable $3,500

(being collection is recorded)

Here cash is debited as it increased the assets and credited the account receivable as it decreased the assets