Answer:
C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300
Explanation:
accounts receivable $375,000
allowance for uncollectible accounts $500
net sales $800,000, all on credit
estimated bad debts = net credit sales x 0.6% = $800,000 x 0.6% = $4,800
since the balance of the allowance account is just $500, it must e adjusted to include the remaining estimated bad debt = $4,800 - $500 = $4,300
the journal entry should be:
December 31, adjustment of bad debt expense
Dr Bad debt expense 4,300
Cr Allowance for uncollectible accounts 4,300
Allowance for uncollectible accounts is a contra asset account that reduces the value of accounts receivable and has a credit balance.
