Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A) debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B) debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C) debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D) debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts needs to have a credit balance of $31,900 after adjustment. Since it currently has a debit balance of $2,300, the company needs to credit the account by $34,200 to achieve the desired balance. Therefore, the correct entry is to debit Bad Debt Expense and credit Allowance for Doubtful Accounts by $34,200.

Allowance for Doubtful Accounts Has a Debit Balance of $2,300