Question

Searcy has accounts receivable of $700,000 and an allowance for doubtful accounts of $54,000. On January 24, 2020, it is learned that the company’s receivable from Hutley Inc. is not collectible and therefore management authorized a write-off of $8,000. The journal entry to record the write-off will include a Select one: a. Debit to Bad Debts Expense. b. Debit to Sales. c. None of the above d. Credit to Accounts Receivable. e. Credit to the Allowance for Doubtful Accounts.

Answer 1

d. Credit to Accounts Receivable.

Step-by-step explanation:

Hutley Inc. is not going to pay the $8,000 to Searcy, therefore Searcy will make the following entry to write off the balance from Account Receivables.

Debit: Allowance for Doubtful Accounts $8,000

Credit: Accounts Receivables $8,000

To write-off Hutley Inc. receivables.