1. Exercise 5-72 (Algorithmic) Correcting an Erroneous Write-Off

   The new bookkeeper at Karlin Construction Company was asked to write off two accounts totaling $1,740 that had been determined to be uncollectible. Accordingly, he debited Accounts Receivable for $1,740 and credited Bad Debt Expense for the same amount.

   Required:

   1. Give both the entry he should have made and the entry required to correct his error.

   One option is to reverse the incorrect entry and make the correct entry as follows:

   Reversal of incorrect entry:

   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash
   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash
   	Reverse error

   Make the correct entry:

   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash
   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Cash
   	Record write-off of defaulted account

   The other option is to fix the error. If an amount box does not require an entry, leave it blank.

   Fix the error:

   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Cash Sales Revenue
   	Accounts Payable Accounts Receivable Bad Debt Expense Sales Discounts Sales Returns and Allowances
   	Accounts Payable Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense Sales Revenue
   	Write off defaulted account and correct error