Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the year?
A) debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
B) debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
C) debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
D) debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

Question

Quizplus · Accepted Answer

To record the Bad Debt Expense for the year, we need to debit the Bad Debt Expense account and credit the Allowance for Doubtful Accounts account. The amount to be recorded as Bad Debt Expense is the estimated uncollectible accounts of $41,900 minus the existing credit balance of Allowance for Doubtful Accounts of $1,300, which gives us $40,600. Therefore, the adjusting entry would be:
Debit Bad Debt Expense, $40,600
Credit Allowance for Doubtful Accounts, $40,600

Allowance for Doubtful Accounts Has a Credit Balance of $1,300