School Supplies Company made the following journal entries (1) to write off an account judged to be uncollectible and (2) to record bad debt expense for 20X1: $\begin{array}{|l|l|r|r|}
\hline &&\mathrm{DR} & \mathrm{CR} \
\hline \text { A } & \begin{array}{l}
\text { Allowance for doubtful accounts } \
\text { Trade receivables }
\end{array} & 1,000 & \
&&&1,000\
\hline \mathrm{B} & \begin{array}{l}
\text { Bad debt expense } \
\text { Allowance for doubtful accounts }
\end{array} & 3,000 & \
&&&3,000\
\hline
\end{array}$
As a result of the first entry only, the book value (net realizable value) of trade receivables was A; as a result of the second entry only, the book value (net realizable value) of trade receivable was B: $$\begin{array} { | l | l | l | }
\hline & \text { A } & \text { B } \
\hline 1 & \text { Increased } & \text { Decreased } \
\hline 2 & \text { Decreased } & \text { Decreased } \
\hline 3 & \text { Unchanged } & \text { Unchanged } \
\hline 4 & \text { Unchanged } & \text { Decreased } \
\hline
\end{array}$$

Question

School Supplies Company made the following journal entries (1) to write off an account judged to be uncollectible and (2) to record bad debt expense for 20X1: $\begin{array}{|l|l|r|r|}
\hline &&\mathrm{DR} & \mathrm{CR} \
\hline \text { A } & \begin{array}{l}
\text { Allowance for doubtful accounts } \
\text { Trade receivables }
\end{array} & 1,000 & \
&&&1,000\
\hline \mathrm{B} & \begin{array}{l}
\text { Bad debt expense } \
\text { Allowance for doubtful accounts }
\end{array} & 3,000 & \
&&&3,000\
\hline
\end{array}$
 As a result of the first entry only, the book value (net realizable value) of trade receivables was A; as a result of the second entry only, the book value (net realizable value) of trade receivable was B: $$\begin{array} { | l | l | l | } 
\hline & \text { A } & \text { B } \
\hline 1 & \text { Increased } & \text { Decreased } \
\hline 2 & \text { Decreased } & \text { Decreased } \
\hline 3 & \text { Unchanged } & \text { Unchanged } \
\hline 4 & \text { Unchanged } & \text { Decreased } \
\hline
\end{array}$$

Quizplus · Accepted Answer

The first entry, which writes off an account as uncollectible, does not change the book value of trade receivables because it moves the amount from trade receivables to allowance for doubtful accounts, both of which affect the net realizable value of receivables in the same way. The second entry, recording bad debt expense, decreases the book value because it increases the allowance for doubtful accounts without directly affecting the gross amount of trade receivables, thereby reducing the net realizable value.

School Supplies Company Made the Following Journal Entries (1) to Write