At the end of 2020, Headland Company has accounts receivable of $784,000 and an allowance for doubtful accounts of $39,200. On January 16, 2021, Headland Company determined that its receivable from Ramirez Company of $5,880 will not be collected, and management authorized its write-off. Prepare the journal entry for Headland Company to write off the Ramirez receivable. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Debit allowance for doubtful debt   $5,880

Credit accounts receivable               $5,880

Being entries to write off receivable due from Ramirez Company (previously provided for) that will not be collected.

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

To write off the receivable from Ramirez Company of $5,880 will not be collected,

Debit allowance for doubtful debt   $5,880

Credit accounts receivable               $5,880

Being entries to write off receivable due from Ramirez Company (previously provided for) that will not be collected.

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