An aging of a company's trade receivables indicates that $6,500 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a
A) debit to Bad Debts Expense for $6,500.
B) debit to Bad Debts Expense for $5,300.
C) debit to Allowance for Doubtful Accounts for $6,500.
D) debit to Bad Debts Expense for $7,700.

Question

Quizplus · Accepted Answer

The correct adjustment is a debit to Bad Debts Expense for $7,700. This is because the existing $1,200 debit balance in the Allowance for Doubtful Accounts needs to be offset to reflect the new estimate of $6,500 being uncollectible, resulting in a total adjustment of $7,700 ($6,500 + $1,200).

An Aging of a Company's Trade Receivables Indicates That $6,500