Question

Gideon company uses the direct write-off method of accounting for uncollectible accounts. on may 3, the gideon company wrote off the $2,000 uncollectible account of its customer,

a. hopkins. the entry or entries gideon makes to record the write off of the account on may 3 is: multiple choice bad debts expense 2,000 accounts receivable—a. hopkins 2,000 allowance for doubtful accounts 2,000 accounts receivable—a. hopkins 2,000 accounts receivable—a. hopkins 2,000 cash 2,000 cash 2,000 accounts receivable—a. hopkins 2,000 accounts receivable—a. hopkins 2,000 bad debts expense 2,000

Answer 1

The correct journal entry for the write-off using the direct write-off method involves debiting Bad Debts Expense for $2,000 and crediting Accounts Receivable—A. Hopkins for $2,000 to remove the uncollectible account from the books.

Step-by-step explanation:

When using the direct write-off method for uncollectible accounts, Gideon Company would make the following journal entry on May 3 to write off A. Hopkins's $2,000 uncollectible account:

• 
  
• Debit Bad Debts Expense $2,000
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• Credit Accounts Receivable—A. Hopkins $2,000

Bad Debts Expense is the expense account that represents the cost of estimated uncollectible accounts. This is used when a company has decided that an account is uncollectible and is not going to be paid. The corresponding credit is to Accounts Receivable—A. Hopkins, which removes the account receivable from the books. It's important to note that the Allowance for Doubtful Accounts is not used in the direct write-off method; this account is used in the allowance method. The other options presented involving Cash are incorrect because cash is unaffected when an account is deemed uncollectible and subsequently written off; there has been no cash flow associated with this write-off.

Answer 2

The answer to this accounting question relates to the method that will provide the largest tax-writeoff and not subject the company to an unwanted audit; it will be critical to document that multiple efforts have been made to contact a. Hopkins.