Using the aging method,estimated uncollectible accounts are $3,000.If the balance in the Allowance for Doubtful Accounts is a $600 credit before adjustment,what is the Bad Debts Expense adjustment for the period?
A)$3,000
B)$600
C)$2,400
D)$3,600

Question

Quizplus · Accepted Answer

The aging method estimates the amount of uncollectible accounts based on the age of the accounts receivable. Since the estimated uncollectible accounts are $3,000, this means that the Bad Debts Expense should be increased by that amount to account for the potential losses from uncollectible accounts.

Before adjustment, the balance in the Allowance for Doubtful Accounts is a $600 credit. This means that the company had previously estimated that there would be $600 of uncollectible accounts. Since the new estimate is $3,000, this means that the Bad Debts Expense needs to be increased by $2,400 ($3,000 - $600) to account for the additional estimated losses.

Therefore, the correct answer is C) $2,400.

Using the Aging Method,estimated Uncollectible Accounts Are $3,000