Joe is a customer of Bobble, Inc. which uses the allowance method to account for uncollectible accounts. The company wrote off his account of $2,000 on March 15. On June 11, he sent in a payment of $800. What will Bobble, Inc. record first to reinstate his account?

Question

Quizplus · Accepted Answer

To reinstate an account that has been previously written off, the journal entry will include debiting the accounts receivable and crediting the allowance for doubtful accounts. In this case, Bobble, Inc. will debit Accounts Receivable/Joe for $800 and credit Allowance for Doubtful Accounts for $800 to reinstate Joe's account. Option A is incorrect as it suggests recording the payment first, but the account needs to be reinstated before the payment can be applied. Option B is incorrect as it suggests recording bad debt expense, which was already recorded when the account was written off. Option C is incorrect as the allowance for doubtful accounts was already credited when the account was originally written off.

Joe Is a Customer of Bobble, Inc