You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments.Assuming you use the allowance method, the entry you make is to A)debit Allowance for Doubtful Accounts and credit Bad Debt Expense. B)debit Allowance for Doubtful Accounts and credit Accounts Receivable. C)debit Bad Debt Expense and credit Allowance for Doubtful Accounts. D)debit Bad Debt Expense and credit Accounts Receivable.

Question

Quizplus · Accepted Answer

When a customer goes bankrupt and will not make any future payments, the entry to record the bad debt expense is to debit Allowance for Doubtful Accounts and credit Accounts Receivable. This reduces the Accounts Receivable balance by the amount of the uncollectible debt and increases the Allowance for Doubtful Accounts balance by the same amount.

You Have Just Received Notice That a Customer of Yours