Twinkie Ltd.assigned $500,000 of Accounts Receivable to Friendly Finance as security for a loan of $420,000.Friendly charged a 2% commission on the amount of the loan; the interest rate on the note was 10%.During the first month, Twinkie collected $110,000 of the assigned accounts, after deducting $380 of discounts.As well, Twinkie accepted returns worth $1,350 and wrote off assigned accounts totalling $3,700.Entries made by Twinkie during the first month would include a
A)debit to Cash of $110,380.
B)debit to Bad Debts Expense of $3,700.
C)debit to Allowance for Doubtful Accounts of $3,700.
D)debit to Accounts Receivable of $115,430.

Question

Quizplus · Accepted Answer

The write-off of assigned accounts would require a debit to Allowance for Doubtful Accounts, not Bad Debts Expense, as the accounts were previously estimated to be uncollectible.