Question

An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require aa. debit to Bad Debts Expense for $4,000.b. debit to Allowance for Doubtful Accounts for $2,800.c. debit to Bad Debts Expense for $2,800.d. credit to Allowance for Doubtful Accounts for $4,000.

Answer 1

Answer:

The correct answer is letter "C": debit to Bad Debts Expense for $2,800.

Explanation:

Bad Debt Expenses are debts a company incurs when it sells goods or services but receives no payment or partial payments. These investments are part of conducting business on credit and occur for several reasons that include fraud, trade disagreements or a company simply avoiding the obligation to pay.  

In the example, the adjustment to bad debts expense will be the result of accounts receivable minus doubtful accounts. Then:

Bad Debt Expenses = $4000 - $1200 = $2800

Answer 2

Answer:

debit to Bad Debts Expense for $2,800

Explanation:

The adjustment to record bad debts for the period will require a debit to Bad Debts Expense for $2800.

i.e. $(4000 - 1200) = $2800