Jones Company, a reputable business entity, encounters a common accounting scenario involving accounts receivable and the allowance for bad debts. In this scenario, Jones initially wrote off $500 of the Accounts Receivable owed by Joe Smith due to doubts about collection. However, circumstances changed when Joe Smith ultimately paid the $500 outstanding amount, prompting Jones Company to reverse the initial write-off.

As per accounting principles, Jones Company follows the allowance method to manage its accounts receivable. Now, to accurately reflect the receipt of cash from Joe Smith after the reversal of the write-off, Jones Company must execute the appropriate journal entry.

The journal entry should account for the receipt of cash from Joe Smith, reinstating the previously written-off amount in the Accounts Receivable ledger while adjusting the Allowance for Bad Debts account accordingly.

Considering the nuances of the allowance method and the necessity for accurate financial reporting, what journal entry should Jones Company make to reflect the receipt of cash from Joe Smith after the reversal of the write-off on his account?

Choose the correct journal entry from the options provided, ensuring accuracy in recording the debits and credits for the Accounts Receivable, Allowance for Bad Debts, and Cash accounts. Select the entry that aligns with the proper accounting treatment in this scenario."

Answer rating: 100% (QA)

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