Molten Manufacturing collects $350 on an account that had been directly written off in the previous year in the amount of $630. The journal entry to record the transaction would include a:
A) $350 credit to Bad Debts Expense.
B) $350 credit to Bad Debts Recovered.
C) $630 debit to Accounts Receivable.
D) $630 credit to Accounts Receivable.

Question

Quizplus · Accepted Answer

When a company collects on an account that had been previously written off, the collection is recorded as a credit to Bad Debts Recovered (or a similar account), not to Bad Debts Expense or Accounts Receivable, because the write-off had removed the amount from Accounts Receivable.

Molten Manufacturing Collects $350 on an Account That Had Been