An aging of a company's accounts receivable indicates that the estimate of uncollectible receivables totals $7,900. If Allowance for Doubtful Accounts has a $700 credit balance, the adjustment to record the bad debt expense for the period will require a
A) debit to Bad Debt Expense for $8,600
B) debit to Bad Debt Expense for $7,900
C) debit to Bad Debt Expense for $7,200
D) credit to Allowance for Doubtful Accounts for $700

Question

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The adjustment to record the bad debt expense requires the Allowance for Doubtful Accounts to reflect the new estimate of $7,900 in uncollectible receivables. With a current credit balance of $700, an additional $7,200 (=$7,900 - $700) needs to be added to the allowance account. This is done by debiting Bad Debt Expense for $7,200 and crediting Allowance for Doubtful Accounts for the same amount.

An Aging of a Company's Accounts Receivable Indicates That the Estimate