Wadas Company uses the direct write-off method to account for uncollectible rece
ID: 2594637 • Letter: W
Question
Wadas Company uses the direct write-off method to account for uncollectible receivables. On September 18, Wadas wrote off a $6,000 account receivable from customer W. Jeter. On October 24, Wadas unexpectedly received full payment from Jeter on the previously written off account 3. Journalize Wadas's write-off on the uncollectible receivable. 4. Journalize Wadas's collection of the previously written off receivable. 3 od's wirteof on the uncollecible receivable. (Rescord debits fra,thn, credits uncollectible receivable. (Record debits first, then, credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation Debit Credit Sept. 18Explanation / Answer
In the direct write-off method, uncollectible accounts receivable are directly written off against income at the time when they are actually determined as bad debts. When debt is determined as uncollectible, a journal entry is passed in which bad debts expense account is debited and accounts receivable account is credited as shown below.
Sep,18
badbebt expense a/c Dr $6000
To Account receivable a/c $6000
(Being bad debt expense write off under direct method)
On October 24:
This transaction requires two entries. The first entry will restore the balance in accounts receivable. The second entry will show the receipt of the payment. It seems counterintuitive to restore the balance to pay it off, but for recordkeeping purposes, it is necessary to restore the account balance and show the customer properly paid his debt. We must make sure to show that w.jeter paid the amount he owed, not just the fact that the company received some cash.
October,24:
Account receivable a/c Dr $6000
To bad bebt. $6000
(Being cash received from bad debt account so entry reverse)
Cash a/c Dr. $ 6000
To Account receivable. $6000
(Being cash received from uncollectible account s adjusted)
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