The allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $640 of accounts receivable are uncollectible. Allowance for Doubtful Accounts has a debit balance of $110. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of
A) $110
B) $640
C) $530
D) $750

Question

Quizplus · Accepted Answer

The correct adjusting entry requires crediting Allowance for Doubtful Accounts for $750. This is because the desired balance after adjustment is $640 (based on the analysis), but there's already a $110 debit balance in the account. To adjust it to the required $640 credit balance, you need to add $750 ($640 desired credit balance + $110 to offset the existing debit balance).

The Allowance Method of Estimating Uncollectible Accounts Receivable Based on an Analysis