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Discount Mart utilizes the allowance method of accounting for uncollectible receivables.
On December 12, the company receives a $540 check from Chad Thomas in settlement of Thomas's $1,280 outstanding accounts receivable. Due to Thomas's failing health, he is closing his company and is expecting to make no further payments to Discount Mart.
Journalize this transaction. If an amount box does not require an entry, leave it blank.

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Answer: See explanation

Explanation:

From the question, we are given the information that on December 12, the company receives a $540 check from Chad Thomas in settlement of Thomas's $1,280 outstanding accounts receivable, then the journal entry based on the above will be:

December 12:

Debit Cash $540

Debit Allowance for doubtful account $740

Credit Account receivable $1280

Note that the allowance for doubtful account was calculated as:

= Account receivable - Cash

= $1280 - $540

= $740

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