Worley Limited uses the allowance method to account for bad debts.In 2013, a customer owing $650 of goods purchased on credit went bankrupt.The full amount of the receivable was considered uncollectible.What entry should be made to reflect this information?

Question

Quizplus · Accepted Answer

Under the allowance method, the amount of uncollectible accounts is estimated and recorded as an expense in the period the sale is made. When a specific account is deemed uncollectible, it is written off by removing the amount from the accounts receivable balance and the allowance for doubtful accounts balance.

Option A is incorrect because it only records the bad debt expense when it is written off, instead of recognizing it in the period the sale is made.

Option B is incorrect because it only removes the amount from the accounts receivable balance and does not adjust the allowance for doubtful accounts balance.

Option D is incorrect because it records the full amount of the sale as bad debt expense instead of only the estimated uncollectible amount.

Worley Limited Uses the Allowance Method to Account for Bad