When using the allowance method to estimate uncollectible accounts receivable based on an analysis of receivables shows that $790 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $120. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of:
A) $120
B) $790
C) $670
D) $910

Question

Quizplus · Accepted Answer

The adjusting entry should bring the Allowance for Doubtful Accounts to the estimated uncollectible amount of $790. Since there is already a $120 debit balance, you need to credit $910 to offset the debit and reach the desired credit balance.

When Using the Allowance Method to Estimate Uncollectible Accounts Receivable