On December 31, 2017, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $10,000. Assume that on February 2, 2018, Extreme Fitness received a payment of $500 from one of the customers whose balance had been written off. Prepare the journal entries to record this transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

The entries is as followed:

February 2 2018

Dr Account Receivable                             500

  Cr Allowance for doubtful account         500

(to reverse receivable written-off)

 Dr Cash           500

  Cr Account Receivable 500

(to record cash collection from receivable)  

Explanation:

As the company apply the allowance method, we apply the following steps to record collection of receivable which has already written-off:

+ First, we reverse the written-off accounting entry which had been made before with the amount of $500 ( Written-off entry: Dr Allowance for doubtful debt - Cr Account Receivable; Reverse entry as shown in the answer part);

+ Second, we record the collection of receivable by Dr Cash (increase) and Cr account receivable (decrease).

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