Allowance for Doubtful Accounts has a debit balance of $2,300 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 $31,900. Which of the following adjusting entries is needed to record the bad debt expense for the year?
A) debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
B) debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
C) debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
D) debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

Question

Quizplus · Accepted Answer

The correct adjusting entry is to debit Bad Debt Expense for $34,200 and credit Allowance for Doubtful Accounts for $34,200. This is because the desired ending balance in the Allowance for Doubtful Accounts is $31,900, but there is already a $2,300 debit balance. To adjust the account to the desired credit balance, you need to add both the existing debit balance and the estimated uncollectible accounts together ($2,300 + $31,900 = $34,200).

Allowance for Doubtful Accounts Has a Debit Balance of $2,300