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Prashant

· started a discussion

· 1 Months ago

🅰️ must be correct (Question:325534.0)

Bad debts Dr
To debtors

Provision for bad debts Dr
To bad debts

Now because current assets have been reduced after write off, current ratio will be lesser than before. So A must be the answer.
Please correct me

Question:

Thompson Corporation wrote off a $200 uncollectible account receivable against the $2,400 balance in its Allowance for Bad Debts account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (Y).

Options:
A)

X greater than Y

B)

X equals Y

C)

X less than Y

D)

Cannot be determined

Solution:

 

Ans: (b) The write-off of an uncollectible account reduces Accounts Receivable and the corresponding contra account, Allowance for Uncollectible Accounts. 

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