A customer of Exquisite Flooring recently filed for bankruptcy protection two months ago, leading the credit manager of Exquisite Flooring to conclude that the company would never collect the balance of $2,800 owed by the customer to our company.
-Use the information above to answer the following question.Suppose that three months after filing bankruptcy,Exquisite Flooring's customer paid its outstanding account balance.Which of the following journal entries would be made to record this transaction?
A) Debit Cash and credit Allowance for Doubtful Accounts for $ 2,800
B) Debit Cash and credit Accounts Receivable for $2,800
C) Debit Accounts Receivable and credit Allowance for Doubtful Accounts for $2,800; debit Cash and credit Accounts Receivable for $2,800
D) Debit Cash and credit Sales for $2,800

Question

Quizplus · Accepted Answer

Since the customer paid their outstanding balance, Exquisite Flooring will need to record the transaction by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts for the $2,800 owed by the customer. Then, the company can record the receipt of cash by debiting Cash and crediting Accounts Receivable for the same amount. Therefore, the correct option is to choose option C.

A Customer of Exquisite Flooring Recently Filed for Bankruptcy Protection