Allowance for Doubtful Accounts has a debit balance of $1,200 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $13,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
A) debit Bad Debt Expense, $15,100; credit Allowance for doubtful Accounts, $15,100
B) debit Allowance for Doubtful Accounts, $15,100; credit Bad Debt Expense, $15,100
C) debit Allowance for Doubtful Accounts, $12,700; credit Bad Debt Expense, $12,700
D) debit Bad Debt Expense, $12,700; credit Allowance for Doubtful Accounts, $12,700

Question

Quizplus · Accepted Answer

The company needs to adjust the Allowance for Doubtful Accounts to reflect the estimated uncollectible amount of $13,900. Since the allowance account has a debit balance of $1,200, the adjustment needed is $13,900 + $1,200 = $15,100. Therefore, the correct entry is to debit Bad Debt Expense for $15,100 and credit Allowance for Doubtful Accounts for $15,100.

Allowance for Doubtful Accounts Has a Debit Balance of $1,200