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 correct adjustment requires increasing the Allowance for Doubtful Accounts to match the estimated uncollectible receivables of $19,700. Since it already has a credit balance of $2,100, an additional $17,600 ($19,700 - $2,100) is needed. This is done by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts for $17,600.

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