A company uses the allowance method of accounting for bad debt. During 2001, an important customer became bankrupt and a related receivable of $6,400 was deemed uncollectible. The 2001 entry to record this event would be: $$\begin{array} { | l | l | l | l | }
\hline 1 &\text { Bad debt expense } & 6,400 & \
\hline &\text { A llowance tor doubtful accounts } & & 6,400 \
\hline 2 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline 3& \text { Bad debt expense } & 6,400 & \
\hline& \text { Accounts receiv able } & & 6,400 \
\hline 4 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Allowance tor doubtful accounts } & & 6,400 \
\hline 5& \text { Allowance tor doubtful accounts } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline
\end{array}$$

Question

A company uses the allowance method of accounting for bad debt. During 2001, an important customer became bankrupt and a related receivable of $6,400 was deemed uncollectible. The 2001 entry to record this event would be: $$\begin{array} { | l | l | l | l | } 
\hline 1 &\text { Bad debt expense } & 6,400 & \
\hline &\text { A llowance tor doubtful accounts } & & 6,400 \
\hline 2 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline 3& \text { Bad debt expense } & 6,400 & \
\hline& \text { Accounts receiv able } & & 6,400 \
\hline 4 &\text { Loss on receivable } & 6,400 & \
\hline &\text { Allowance tor doubtful accounts } & & 6,400 \
\hline 5& \text { Allowance tor doubtful accounts } & 6,400 & \
\hline &\text { Accounts receivable } & & 6,400 \
\hline
\end{array}$$

Quizplus · Accepted Answer

When using the allowance method, writing off an uncollectible account involves debiting the Allowance for Doubtful Accounts and crediting Accounts Receivable, which matches Choice 5. This does not affect the income statement immediately since the expense was recognized earlier when the allowance was estimated.

A Company Uses the Allowance Method of Accounting for Bad