Carrington Company uses the allowance method for recording bad debts.On February 1,Carrington wrote off a $3,500 customer account balance when it became clear that the particular customer would never pay.On May 29,Carrington unexpectedly received a check for $3,500 from the customer.On May 29,Carrington will:
A)Debit Cash and credit Bad Debt Expense for $3,500;debit Accounts Receivable and credit Allowance for Doubtful Accounts for $3,500.
B)Debit Allowance for Doubtful Accounts and credit Accounts Receivable for $3,500;debit Cash and credit Bad Debt Expense for $3,500.
C)Debit Accounts Receivable and credit Allowance for Doubtful Accounts for $3,500;debit Cash and credit Accounts Receivable for $3,500.
D)Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,500;debit Cash and credit Accounts Receivable for $3,500.

Question

Quizplus · Accepted Answer

Collection of a previously written off account is called a recovery and it is accounted for in two parts.First,the receivable is put back on the books by recording a journal entry that is the opposite of the entry used to record the write-off;this entry includes a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.Second,the collection of the account receivable is recorded with a debit to Cash and a credit to Accounts Receivable.

Carrington Company Uses the Allowance Method for Recording Bad Debts