Allowance for Doubtful Accounts has an unadjusted balance of $800 at the end of the year,and an analysis of accounts in the customers ledger indicates doubtful accounts of $15,000.Which of the following records the proper provision for doubtful accounts?
A)Increase Uncollectible Accounts Expense,$800;increase Allowance for Doubtful Accounts,$800
B)Increase Uncollectiable Accounts Expense $15,000;increase Allowance for Doubtful Accounts,$15,000
C)Increase Uncollectible Accounts Expense,$14,200;increase Allowance for Doubtful Accounts,$14,200
D)Increase Uncollectible Accounts Expense,$15,800;increase Allowance for Doubtful Accounts,$15,800

Question

Quizplus · Accepted Answer

The unadjusted balance of the Allowance for Doubtful Accounts is already $800, so we only need to adjust it to reflect the additional doubtful accounts of $15,000. Therefore, we need to increase the allowance account by $14,200 ($15,000 - $800). We also need to recognize the expense related to the increase in doubtful accounts, which is $14,200 as well, since we are adjusting the allowance to reflect the true level of potential bad debts. Thus, we need to record an increase in the Uncollectible Accounts Expense of $14,200 and an increase in the Allowance for Doubtful Accounts of $14,200. Option C is the only choice that reflects this. Option A only adjusts for the existing balance in the allowance account and not for the additional doubtful accounts. Option B and D both overstate the adjustment by adding the existing balance to the incremental amount of doubtful accounts.

Allowance for Doubtful Accounts Has an Unadjusted Balance of $800