An aging of a company's accounts receivable indicates that $3,000 is estimated to be uncollectible.If Allowance for Doubtful Accounts has an $800 debit balance, the adjustment to record bad debts for the period will require a

Question

Quizplus · Accepted Answer

The adjustment to record bad debts for the period requires a debit to Bad Debt Expense for $3,800. This is because the existing $800 debit balance in the Allowance for Doubtful Accounts indicates that the account is underfunded by $800. To adjust the balance to the new estimate of $3,000 being uncollectible, you need to add $3,800 ($3,000 desired balance + $800 to offset the existing debit balance) to the allowance account. This is done by debiting Bad Debt Expense for $3,800 and crediting Allowance for Doubtful Accounts for $3,800.

An Aging of a Company's Accounts Receivable Indicates That $3,000