Question

The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivable are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110.
The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:

A) $530. B) $640. C) $750. D) $110.

Answer 1

Answer:

C) $750.

Explanation:

Bad debt Expense will be calculated using the percentage of debt loss. The expense will be calculated using the account receivable balance.

Closing Value of the Allowance for Doubtful Accounts will be as follow

As Allowance for Doubtful Accounts already have debit balance of $110, we need to adjust the remainder to make the closing credit balance of Allowance for Doubtful Accounts $640 at the year end.

Adjustment Value = $640 + $110 = $750

Answer 2

Answer:

Option C,$750 is the correct answer.

Explanation:

Since the balance in the allowance for doubtful accounts is a debit,the current year estimated uncollectible accounts receivable needs to  be added in order to determine true position of allowance for uncollectible accounts at year end as shown below:

balance of allowance for uncollectible accounts receivable $100

add newly estimated allowance for uncollectible accounts    $640

Actual balance at year end                                                         $750

As a result the correct option is C,$750