Answer:
c. Bad Debts Expense 6,000 ; Allowance for Doubtful Accounts 6,000
Explanation:
Before passing the adjusting entry, first we have to determine the adjusted amount which is shown below:
= Uncollectible balance - credit balance of Allowance for Doubtful Accounts
where,
Uncollectible balance = Accounts receivable × uncollectible percentage
= $200,000 × 4%
= $8,000
And, the credit balance of Allowance for Doubtful Accounts is $2,000
Now put these values to the above formula
So, the value would be equal to
= $8,000 - $2,000
= $6,000
Now the adjusting entry would be
Bad debt expense A/c Dr $6,000
To Allowance for doubtful debts $6,000
(Being estimated bad debts is recorded)
