Answer:
The correct option is Bad Debts Expense 16,125 Allowance for Doubtful Accounts 16,125.
Explanation:
Aging of receivable method is a way of putting the total amount of accounts receivable into a bucket based on aging of the accounts receivble and allocating credit risk loss percentage to each bucket. For example, Not due, 1-30 days, 31-60 days, over 60 days, with each class having 0%, 0.5%, 1%, 2% respectively.
The company had debit balance of $375 in the allowance for doubtful accounts and already estimated the $15,750 should be the portion of the accounts receivable that was deemed uncollectible. To reinstate the allowance account to $15,750, we need to add $375 to arrive at $16,125. So, the appropriate journals would be:
Debit Bad debt expense $16,125
Credit Allowance for doubtful accounts $16,125
<em>(To record bad debt expense for the year)</em>
