Aircraft Engine Parts' Allowance for Doubtful Accounts had an unadjusted credit balance of $680. The manager estimates that $700 of the Accounts Receivable is uncollectible. Using the balance sheet approach, the year-end adjusting entry for Bad Debts Expense:
A) includes a debit to the Bad Debt Expense account for $20.
B) includes a debit to the Bad Debts Expense account for $700.
C) includes a credit to the Bad Debts Expense account for $1,380.
D) includes a credit to the Bad Debts Expense account for $20.

Question

Quizplus · Accepted Answer

The adjusting entry to record the bad debts expense should bring the Allowance for Doubtful Accounts to the estimated uncollectible amount of $700. Since the allowance already has a credit balance of $680, an additional $20 (700 - 680) needs to be debited to Bad Debt Expense to adjust the allowance to the correct amount.

Aircraft Engine Parts' Allowance for Doubtful Accounts Had an Unadjusted