Jones CoSells on Credit and Maintains an Allowance for Doubtful Accounts

question 110

Multiple Choice

Jones Co.sells on credit and maintains an allowance for doubtful accounts equal to 2% of the company's $3,450,000 receivables balance.Due to a cash shortfall,Jones sells $275,000 of its receivables with recourse to Ninth National Bank,and the bank withholds $12,000 from the factoring proceeds to cover possible noncollections.If the noncollections eventually amount to $15,000,the entry on Jones' books when notified of this fact would be:

• A) \(\begin{array}{l}
• \text { DR Allowance for doubtful accounts }&3,000 \\
• \text { CR Accounts receivable (specific customers) }&&3,000
• \end{array}\)
• B) \(\begin{array}{lr}
• \text {DR Allowance for doubtful accounts }&15,000\\
• \text { CR Accounts receivable (specific customers)}&&15,000
• \end{array}\)
• C) \(\begin{array}{lr}
• \text { DR Bad Debt expense}&3,000\\
• \text {CR Cash }&&3,000\\
• \end{array}\)
• D) \(\begin{array}{lr}
• \text {DR Allowance for doubtful accounts }&15,000\\
• \text {CR Due from Ninth National Bank }&&12,000\\
• \text {CR Cash }&&3,000\\
• \end{array}\)

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