Canteen Depot estimated uncollectible accounts in the amount of $900 for the period. There is a credit balance in the allowance account of $400. Under the aging of receivables method, the entry to record bad debts expense is:
A) debit Bad Debts Expense $500; credit Accounts Receivable $500.
B) debit Allowance for Doubtful Accounts $900; credit Bad Debts Expense $900.
C) debit Bad Debts Expense $500; credit Allowance for Doubtful Accounts $500.
D) debit Allowance for Doubtful Accounts $900; credit Accounts Receivable $900.

Question

Quizplus · Accepted Answer

The correct entry to record bad debts expense under the aging of receivables method involves debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts for the amount needed to adjust the allowance account to the desired balance. Since the desired balance is $900 and there is already a $400 credit balance, the adjustment needed is $500 ($900 desired - $400 existing = $500 adjustment).

Canteen Depot Estimated Uncollectible Accounts in the Amount of $900