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Financial & Managerial Accounting
Found in: Page 343
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Solstice Company determines on October 1 that it cannot collect $50,000 of its accounts receivable from its customer P. Moore. It uses the direct write-off method to record this loss as of October 1. On October 30, P. Moore unexpectedly paid his account in full to Solstice Company. Record Solstice’s entry(ies) to reflect recovery of this bad debt.

A debtor is an individual or a client for an organization has to whom the firm's merchandise is sold on a credit basis, i.e., without cash involvement.

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Step by Step Solution

Introduction

The organization's bad debt recovery is settled when the debtor pays the full due amount. The amount declared as bad debt is balanced bypassing the relevant journal entry below.

Journal Entry

Date

Particulars

Debit

Credit

a

Accounts receivables

$50,000

Bad debt expense

$50,000

(To record the reinstated amount of the bad debt)

b

Cash

$50,000

Accounts receivables

$50,000

(To record the cash)

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