Question

Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the bad debt expense for the year?a. Debit Allowance for Doubtful Accounts, $34,200; credit Bad Debit Expense, $34,200b. Debit Allowance for Doubtful Accounts, $29,600; credit Bad Debit Expense, $29,600c. Debit Bad Debt Expense, $29.600; credit Allowance for Doubtful Accounts, $29,600d. Debit Bad Debt Expense, $29.600; credit Allowance for Doubtful Accounts, $34,200

Answer 1

Answer:

d. Debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200

Explanation:

allowance balance                           2,300 debit

estimated uncollectible accounts   31,900 credit

adjustment needed                         34,200 credit

We need to adjust the allowance to our estimated uncollectible account. Currently, it has 2,300 debit balance. We need to increase it to 31,900

If we think it in two steps:

We need to credit by 2,300 to have zero balance,

and then 31,900 to reach the expected uncollectible amount

in total a credit for 34,200 needs to be done

The adjusting entry will be:

bad debt expense                       34,200 debit

allowance for doubtful accounts                        34,200 credit