Millie's Draperies uses the allowance method of recording bad debts.On June 13,the $200 account balance of Jane Murphy was charged off.However,on August 5,Murphy paid $80 of the amount previously written off.The entry to record the payment from Murphy would include:
A) debit Accounts Receivable $80;credit Allowance for Doubtful Accounts $80
B) debit Accounts Receivable $200;credit Allowance for Doubtful Accounts $200
C) debit Allowance for Doubtful Accounts $80;credit Cash $80
D) debit Cash $80;credit Uncollectible Accounts Expense $80

Question

Quizplus · Accepted Answer

Since the allowance method was used to record the bad debt, Jane Murphy's account balance was written off as uncollectible and the allowance for doubtful accounts was credited for the same amount. When Murphy pays $80 of the previously written off amount, we need to reverse the entry made on June 13th. This means we need to debit the accounts receivable and credit the allowance for doubtful accounts for the same amount. Therefore, the correct entry is: debit Accounts Receivable $80;credit Allowance for Doubtful Accounts $80.

Millie's Draperies Uses the Allowance Method of Recording Bad Debts