When using the allowance method to estimate uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
A) $110
B) $640
C) $530
D) $750

Question

Quizplus · Accepted Answer

The adjusting entry should bring the Allowance for Doubtful Accounts to the estimated uncollectible amount of $640. Since there is already a debit balance of $110, you need to credit $750 to offset the debit and reach the desired credit balance of $640.

When Using the Allowance Method to Estimate Uncollectible Accounts Receivable