Colleen's account was written off for $800.She received an inheritance from her uncle and wants to clear her account.The entry to record this is to:
A)debit Cash and credit Accounts Receivable/Colleen.
B)debit Allowances for Doubtful Accounts,credit Accounts Receivable/Maggie,debit Cash,and credit Accounts Receivable/Colleen.
C)debit Accounts Receivable/Colleen,credit Allowance for Doubtful Accounts,debit Cash,and credit Accounts Receivable/Colleen.
D)debit Accounts Receivable/Colleen,credit Allowance for Doubtful Accounts,debit Accounts Receivable/Colleen,and credit Cash.

Question

Quizplus · Accepted Answer

The best choice is to debit Accounts Receivable/Colleen (since it is being paid off), credit Allowance for Doubtful Accounts (since Colleen's account was written off previously), debit Cash (since Colleen received an inheritance), and credit Accounts Receivable/Colleen (to eliminate the account). Option A is incorrect because it doesn't address the previously written off account. Option B is incorrect because it includes Accounts Receivable/Maggie, which is not relevant to Colleen's account. Option D is incorrect because it doesn't include the allowance for doubtful accounts which represents the previous write-off.

Colleen's Account Was Written Off for $800