Ray Lumber Company collects $500 on an account that had been directly written off earlier the same year in the amount of $1,000. The journal entry to record the reinstatement transaction would include a:
A) $1,000 debit to Accounts Receivable.
B) $500 debit to Accounts Receivable.
C) $500 debit to Bad Debts Recovered.
D) $1,000 debit to Bad Debts Expense.

Question

Quizplus · Accepted Answer

When an account previously written off is collected, the company must first reinstate the account by debiting Accounts Receivable for the amount collected ($500 in this case) before crediting it with the cash received. This corrects the accounts receivable balance for the partial payment.

Ray Lumber Company Collects $500 on an Account That Had