Gideon Company Uses the Direct Write-Off Method of Accounting for Uncollectible

question 22

Multiple Choice

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Allowance for Doubtful Accounts } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkinse } & & 2,000 \\
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Cash } & & 2,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Allowance for Doubtril Accounts } & & 2,000 \\
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]
• E) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline
• \end{array}\]

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Definitions:

Qualified Dividends

Dividends that meet specific criteria set by the tax code and are eligible for a lower tax rate compared to ordinary income.

Taxation Rate

The percentage at which an individual or corporation is taxed, which can vary based on income level and type of income.

Tax-Exempt Income

Income that is not subject to tax by federal, state, or local authorities, allowing the recipient to keep the full amount.

Recognize Income

The process of reporting income when it is earned, according to accounting principles, regardless of when it is received.