Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the proper adjustment for Bad Debt Expense?
A) debit Allowance for Doubtful Accounts, $17,600; credit Bad Debt Expense, $17,600
B) debit Allowance for Doubtful Accounts, $21,800; credit Bad Debt Expense, $21,800
C) debit Bad Debt Expense $21,800; credit Allowance for Doubtful Accounts, $21,800
D) debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600

Question

Quizplus · Accepted Answer

The adjustment needed is the difference between the uncollectible receivables ($19,700) and the existing credit balance in the Allowance for Doubtful Accounts ($2,100), which is $17,600. Therefore, debit Bad Debt Expense and credit Allowance for Doubtful Accounts by $17,600.

Allowance for Doubtful Accounts Has a Credit Balance of $2,100