Question

If Ohio Company received $2,250 as partial payment on the $5,500 account of Carson Mueller Company and wrote off the remaining balance as uncollectible, the only difference between recording the entry under the direct write-off method and the allowance method (assuming that an adequate allowance account had been set up) would be

Answer 1

Step-by-step explanation:

Under the direct write-off method, the journal entry would be

Bad debt expense A/c Dr XXXX

To Accounts receivable XXXX

(Being bad debt expense is recorded)

Under the allowance method, the journal entry would be

Bad debt expense A/c Dr $ XXXX

To Allowance for Doubtful Accounts $ XXXX

(Being bad debt is recorded)

The debit to bad debt expense for $3,250 ($5,500 - $2,250) under the direct write-off method instead of the debit to the Allowance for Doubtful Accounts under the allowance method