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On January 1,2016,Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500,respectively.During the year Kincaid reported $72,500 of credit sales.Kincaid wrote off $550 of receivables as uncollectible in 2016.Cash collections of receivables amounted to $74,550.Kincaid estimates that it will be unable to collect one percent (1%)of credit sales.
-Which of the following reflects the effect of the year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method?

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The year-end adjusting entry to record estimated uncollectible accounts expense using the allowance method would be to create an expense account and a contra-asset account. The expense account would be debited for the estimated amount of uncollectible accounts (which is one percent of credit sales or $725). The contra-asset account (Allowance for Doubtful Accounts) would be credited for the same amount since it has a credit balance. Therefore, choice D reflects the appropriate adjusting entry.

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