Allowance for doubtful accounts has a debit balance of $980 at the end of the current year (prior to adjustment). Net credit sales for the current period amount to $900,000 and 2.5% is estimated to be uncollectible. The adjusting entry would require a credit to:
A)bad-debt expense for $23,480.
B)allowance for doubtful accounts for $21,520.
C)allowance for doubtful accounts for $22,500.
D)accounts receivable accounts for $22,500.

Question

Quizplus · Accepted Answer

The estimated uncollectible amount is 2.5% of $900,000, which is $22,500. Since the allowance account has a debit balance of $980, the credit needed to adjust it to the estimated uncollectible amount is $22,500.

Allowance for Doubtful Accounts Has a Debit Balance of $980