Allowance for doubtful accounts has a credit balance of $900 at the end of the current year (prior to adjustment). An analysis of the aged accounts in the customers' ledger indicates uncollectible accounts of $16,000. The adjusting entry would require a debit to:
A)bad-debt expense for $15,100.
B)bad-debt expense for $16,900.
C)allowance for doubtful accounts for $15,100.
D)allowance for doubtful accounts for $16,900.

Question

Quizplus · Accepted Answer

The adjusting entry to record the allowance for doubtful accounts involves debiting bad-debt expense and crediting allowance for doubtful accounts. The desired balance in the allowance account is $16,000, but there is already a credit balance of $900. Therefore, the adjustment needed is $16,000 - $900 = $15,100, which is debited to bad-debt expense to increase the allowance to the desired amount.

Allowance for Doubtful Accounts Has a Credit Balance of $900