Question

Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a

a. Debit to accounts receivable
b. Debit to allowance for doubtful accounts
c. Credit to bad debt expense
d. Credit to accounts receivable

Answer 1

When reinstating a specific receivable previously written off using the allowance method, the entry involves crediting the accounts receivable (D).

Step-by-step explanation:

When reinstating a specific receivable previously written off using the allowance method, the entry involves crediting the accounts receivable. This action reinstates the specific receivable, increasing the accounts receivable balance. When a receivable is initially written off, it reduces the accounts receivable balance, but when reinstated, it reverses that reduction by increasing the accounts receivable balance. This reinstatement doesn't impact the allowance for doubtful accounts or bad debt expense directly since those were adjusted when the receivable was initially written off. The reinstatement simply reverses the earlier reduction in accounts receivable.

The process involves recognizing that the debt previously considered uncollectible is now collectible and therefore reinstating it as part of the accounts receivable balance. This doesn't affect the allowance for doubtful accounts or bad debt expense accounts, as those adjustments were made when the debt was originally written off.

So, in essence, the correct entry would involve a credit to accounts receivable to reinstate the specific receivable previously written off.

Correct answer: d. Credit to accounts receivable

Answer 2

The correct entry to reinstate a specific receivable previously written off using the allowance method of accounting for uncollectible receivables would be (d) Credit to accounts receivable.

Step-by-step explanation:

In the allowance method, when a specific receivable that was previously written off is reinstated, it means that the company believes the amount is collectible after all. To reflect this, you would credit the accounts receivable to recognize the reinstatement of the specific amount. This action increases the accounts receivable balance to reflect the company's expectation to collect the amount that was previously considered uncollectible.

Contrary to the other options, a Debit to accounts receivable (option a) would increase the receivable, not reinstate it. A Debit to allowance for doubtful accounts (option b) is used when estimating the allowance, not when reinstating a specific receivable. A Credit to bad debt expense (option c) is typically done when writing off accounts, not when reinstating them. Therefore, the correct entry, when reinstating a specific receivable, is to Credit accounts receivable.

In conclusion, the entry reflects a reversal of the previous write-off, acknowledging the expectation that the specific receivable is collectible. This aligns with the principles of the allowance method, where adjustments are made to accurately represent the financial position of the company in relation to its accounts receivable.

Correct option is (d) Credit to accounts receivable.