Lester Company uses the allowance method and estimates its bad-debt expense based on aging the receivables. Before the adjusting entry, the allowance for doubtful accounts had a $425 debit balance. Based on aged receivables, Lester estimates that $3,700 will probably prove uncollectible. What is the amount of the adjusting journal entry that Lester should make?
A)$3,700
B)$3,275
C)$4,125
D)$425

Question

Quizplus · Accepted Answer

The adjusting entry should bring the allowance for doubtful accounts to the estimated uncollectible amount of $3,700. Since there is already a $425 debit balance, Lester needs to credit $4,125 to the allowance account to offset the debit and reach the desired balance.

Lester Company Uses the Allowance Method and Estimates Its Bad-Debt