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Under the allowance method, a $3,000 customer balance is judged fully uncollectible. What entry writes it off?
ADebit Irrecoverable debts expense $3,000; credit Receivables $3,000
BDebit Allowance for receivables $3,000; credit Receivables $3,000
CDebit Receivables $3,000; credit Allowance for receivables $3,000
DDebit Allowance for receivables $3,000; credit Cash $3,000
Answer & Solution
Correct answer: B. Debit Allowance for receivables $3,000; credit Receivables $3,000
1. Under the allowance method the write-off draws down the allowance, so it is debited.
2. The customer balance is removed, so Receivables is credited.
3. The expense is not touched on write-off under this method, so the expense option is wrong.
4. One distractor reverses the entry and one credits Cash, both wrong.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.4.2 "Allowance Method", p.140_
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