Question

On December 31, prior to adjustment, Allowance for Uncollectible Accounts has a credit balance of $400. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for______________

Answer 1

Answer:

Bad debts expense                                      Debit            $ 600

Allowance for Uncollectible expenses       Credit                          $ 600

Explanation:

The allowance for uncollectible accounts is estimated usually on the basis of a percentage of credit sales. The data in the question indicates that the estimated losses from uncollectible accounts is $ 1,000.

The unadjusted balance is $ 400, so the adjusting entry is for the balancing amount, i.e. $ 600. It is debited to bad debts and credited to allowance for uncollectible accounts.