Solstice Company, which uses the direct write-off method, determines on October 1 that it cannot collect $66,000 of its accounts receivable from its customer, P. Moore. On October 30, P. Moore unexpectedly pays his account in full to Solstice Company. Record Solstice's entries for recovery of this bad debt. View transaction list > 1 Record the reinstatement of the account previously written off. 2 Record the cash received on account. Credit
Solstice Company, which uses the direct write-off method, determines on October 1 that it cannot collect $66,000 of its accounts receivable from its customer, P. Moore. On October 30, P. Moore unexpectedly pays his account in full to Solstice Company. Record Solstice's entries for recovery of this bad debt. View transaction list > 1 Record the reinstatement of the account previously written off. 2 Record the cash received on account. Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:**Solstice Company: Recovery of Bad Debt**
Solstice Company, which uses the direct write-off method, determines on October 1 that it cannot collect $66,000 of its accounts receivable from its customer, P. Moore. On October 30, P. Moore unexpectedly pays his account in full to Solstice Company.
Record Solstice’s entries for recovery of this bad debt.
1. **Record the reinstatement of the account previously written off.**
2. **Record the cash received on account.**
In the attached transaction list component:
- Transaction 1 involves reinstating the previously written-off account. This means recording a journal entry to reverse the previous write-off.
- Transaction 2 involves recording the receipt of cash from P. Moore, which involves recording a journal entry to acknowledge the payment.
**Graphical Component**:
There is a small segment showing the process of recording transactions, with areas to input Debit and Credit values in journal entry format, but no specific amounts or account names are provided in this graphical segment.
**Educational Insight**:
- The direct write-off method directly writes off specific accounts as uncollectible when they are deemed uncollectible.
- Often, this method is simpler but can be less accurate for financial reporting purposes.
- Reinstating a written-off account involves reversing the write-off entry to re-establish the receivable in the records.
- When the payment is received, the second entry removes the reinstated receivable and records the cash received.
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