When the allowance method is used to account for uncollectible accounts Bad Debt Expense is increased when
A)a sale is made.
B)an account becomes bad and is written off.
C)management estimates the amount of uncollectibles.
D)a customer's account becomes past due.

Question

Quizplus · Accepted Answer

Bad Debt Expense is increased when management estimates the amount of uncollectibles using the allowance method. This is because the allowance for doubtful accounts is a contra asset account that represents an estimate of the amount of accounts receivable that are expected to be uncollectible. As such, when the estimate is made, the balance in the allowance account is adjusted, which in turn affects the Bad Debt Expense account.

When the Allowance Method Is Used to Account for Uncollectible