flynn company determines that it cannot collect $7,200 of its accounts receivable from its customer, mdc…
flynn company determines that it cannot collect $7,200 of its accounts receivable from its customer, mdc. record the journal entry required of flynn under (a) the direct write - off method and (b) the allowance method. view transaction list journal entry worksheet record the write off under the direct write - off method. note: enter debits before credits. transaction general journal debit credit a
Answer
Explanation:
Step1: Direct - write off method concept
When using the direct - write off method, we directly write off the uncollectible accounts as an expense. Debit Bad Debt Expense and credit Accounts Receivable. Bad Debt Expense increases (debit) and Accounts Receivable decreases (credit).
| Transaction | General Journal | Debit | Credit |
|---|---|---|---|
| a | Bad Debt Expense | $7,200 | |
| Accounts Receivable | $7,200 |
Step2: Allowance method concept
Under the allowance method, we use an allowance account. Debit Allowance for Doubtful Accounts and credit Accounts Receivable. The Allowance for Doubtful Accounts is a contra - asset account that reduces Accounts Receivable.
| Transaction | General Journal | Debit | Credit |
|---|---|---|---|
| b | Allowance for Doubtful Accounts | $7,200 | |
| Accounts Receivable | $7,200 |
Answer:
| Transaction | General Journal | Debit | Credit |
|---|---|---|---|
| a (Direct write - off method) | Bad Debt Expense | $7,200 | |
| Accounts Receivable | $7,200 | ||
| b (Allowance method) | Allowance for Doubtful Accounts | $7,200 | |
| Accounts Receivable | $7,200 |