You have just received notice that Agnes Fisher,a customer of yours with an Accounts Receivable balance of $200,has gone bankrupt and will not be making any future payments.Assuming you use the allowance method,the journal entry you make is to

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When using the allowance method, we estimate the amount of accounts that will become uncollectible and set aside an allowance for them. Therefore, when we receive notice that a customer has gone bankrupt, we will debit the allowance for uncollectible accounts (reducing the balance) and credit accounts receivable (reducing the amount due from the bankrupt customer). So, option D is the correct answer. Option A would be the entry made at the time of creating the allowance for uncollectible accounts, not when a specific customer goes bankrupt. Option B is incorrect because we don't debit the allowance for uncollectible accounts when estimating the amount, we credit it. Finally, option C is also incorrect because we don't debit the allowance for uncollectible accounts when a customer goes bankrupt.

You Have Just Received Notice That Agnes Fisher,a Customer of Yours