Question

Joyce corp uses the percent of credit sales method to account for bad debt expense. Joyce determine that a customer account of $20,000 should be written off as uncollectible. The journal entry to write the account off will include?

1) A debit to Bad Debt Expense for $20,000 and a credit to Accounts Receivable for $20,000
2) A debit to Bad Debt Expense for $20,000 and a credit to Allowance for Doubtful Accounts for $20,000
3) A debit to Allowance for Doubtful Accounts for $20,000 and a credit to Bad Debt Expense for $20,000
4) A debit to Accounts Receivable for $20,000 and a credit to Bad Debt Expense for $20,000

Answer 1

The journal entry to write off a $20,000 uncollectible account includes a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.

Step-by-step explanation:

When Joyce Corp uses the percent of credit sales method to account for bad debt expense and determines that a customer account of $20,000 should be written off as uncollectible, the correct journal entry to write the account off will include a debit to Allowance for Doubtful Accounts for $20,000 and a credit to Accounts Receivable for $20,000.

This entry removes the account from Accounts Receivable, acknowledging that it will not be collected, and reduces the Allowance for Doubtful Accounts accordingly.

The correct journal entry to write off a customer account of $20,000 as uncollectible using the percent of credit sales method is:

A debit to Bad Debt Expense for $20,000 and a credit to Allowance for Doubtful Accounts for $20,000

The percent of credit sales method estimates the amount of uncollectible accounts based on a percentage of credit sales. When a customer's account is deemed uncollectible, the Bad Debt Expense is debited and the Allowance for Doubtful Accounts is credited to reduce the accounts receivable.