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 a
A) 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.

Question

Quizplus · Accepted Answer

The aging of accounts receivable indicates that $4,000 are estimated to be uncollectible. The Allowance for Doubtful Accounts already has a credit balance of $1,200. Therefore, to adjust for bad debts, we need to increase the allowance by $2,800 ($4,000 - $1,200). This can be done by debiting the Bad Debts Expense account for $2,800 and crediting the Allowance for Doubtful Accounts for $2,800. So, the correct choice is C.

An Aging of a Company's Accounts Receivable Indicates That $4,000