Question

Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include

a. debit Allowance for Uncollectible Accounts.
b. credit Sales Returns and Allowances.
c. debit Accounts Receivable.
d. debit Bad Debt Expense.

Answer 1

The correct accounting entry to write off an uncollectible account of $10,000 is to debit Allowance for Uncollectible Accounts and credit Accounts Receivable, reflecting the removal of the anticipated loss from the accounts. The correct answer is option c.

Step-by-step explanation:

When Shannon Corp. decides that a customer account of $10,000 should be written off as uncollectible using the aging method for accounting for bad debt expense, the correct journal entry would be:

• Debit Allowance for Uncollectible Accounts for $10,000.
• Credit Accounts Receivable for $10,000.

This entry removes the uncollectible amount from both the Accounts Receivable and the Allowance for Uncollectible Accounts. It reflects that while the asset (Accounts Receivable) is reduced because the payment is not expected to be received, the expense (Bad Debt Expense) would have already been recognized earlier when the allowance was initially adjusted. The reduction in the allowance is recorded at the time of write-off, not as a direct increase in Bad Debt Expense.

Therefore, the correct option is:

c. Debit Accounts Receivable.