Using the aging approach,management estimates that 10% of the $10,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $100 unadjusted credit balance.After the bad debt adjusting entry is recorded,Bad Debt Expense on the income statement will be ______ the Allowance for Doubtful Accounts on the balance sheet.
A) $100 more than
B) $100 less than
C) the same amount as
D) $9,900 more than

Question

Quizplus · Accepted Answer

Based on the aging approach, the estimated amount of uncollectible accounts is 10% of $10,000 or $1,000. Since the Allowance for Doubtful Accounts currently has a $100 unadjusted credit balance, it is not enough to cover the estimated bad debts. Therefore, the bad debt adjusting entry will increase the allowance by $900 ($1,000 - $100), resulting in a balance of $1,000. This means that Bad Debt Expense on the income statement will be $900 more than the Allowance for Doubtful Accounts on the balance sheet, so the answer is B ($100 less than).

Using the Aging Approach,management Estimates That 10% of the $10,000