Using the aging approach,management estimates that 10% of the $30,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $300 unadjusted debit balance.The adjusting entry to record estimated bad debts includes a:
A)debit to Bad Debt Expense of $3,300.
B)debit to Bad Debt Expense of $2,700.
C)debit to Bad Debt Expense of $3,000.
D)credit to Allowance for Doubtful Accounts of $3,000.

Question

Quizplus · Accepted Answer

The aging of accounts receivable method focuses on estimating the ending balance to be reported in the Allowance for Doubtful Accounts.To compute the amount of the adjustment,you must determine how much to increase (credit)the Allowance for Doubtful Accounts to reach the desired adjusted balance.
Ending balance in Allowance for Doubtful Accounts = Unadjusted credit (debit)balance in Allowance for Doubtful Accounts + Bad Debt Expense
Bad Debt Expense = Ending balance in Allowance for Doubtful Accounts − Unadjusted ending credit (debit)balance in Allowance for Doubtful Accounts
= ($30,000 × 0.10)− ($300)= $3,000 − ($300)= $3,300
The entry includes a debit to Bad Debt Expense for $3,300 and a credit to Allowance for Doubtful Accounts for $3,300.

Using the Aging Approach,management Estimates That 10% of the $30,000