Question

Deborah Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $2,100,000 and $35,000 (Cr.), respectively. An aging of accounts receivable indicated that $126,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 is
A. $210,000.
B. $126,000.
C. $91,000.
D. $161,000.

Answer 1

Answer:

The amount of the adjusting entry for bad debts at December 31 is C. $91,000

Explanation:

Adjustment entry is made on changes on the amount of provision for doubtful debts.

Increase in amount of  provision for doubtful debts increases the expenses in income statement.

Decreases in amount of  provision for doubtful debts decreases the expenses in income statement.

Allowance for Doubtful Accounts Balance  $35,000 (cr)

Allowance during th year                             $126,000

Increase in Allowance                                   $ 91,000

$ 91, 000 increase in allowance for doubtful debts increases the expenses in Income Statement