Using the aging approach,management estimates that 10% of the $10,000 of Accounts Receivable will be uncollectible.The Allowance for Doubtful Accounts has a $100 unadjusted debit balance.After the bad debt adjusting entry is recorded,Bad Debt Expense on the income statement will be ________ the Allowance for Doubtful Accounts on the balance sheet.
A)$100 less than
B)$100 more than
C)the same amount as
D)$9,900 more than

Question

Quizplus · Accepted Answer

The aging of accounts receivable method focuses on estimating the ending balance to be reported in the Allowance for Doubtful Accounts.To compute the amount of the adjustment,you must determine how much to increase (credit)the Allowance for Doubtful Accounts to reach the desired adjusted balance.
Ending balance in Allowance for Doubtful Accounts = Unadjusted credit (debit)balance in Allowance for Doubtful Accounts + Bad Debt Expense
Bad Debt Expense = Ending balance in Allowance for Doubtful Accounts - Unadjusted ending credit (debit)balance in Allowance for Doubtful Accounts
= ($10,000 × 0.10)- ($100)= $1,000 - ($100)= $1,100
The entry includes a debit to Bad Debt Expense for $1,100 (which becomes its adjusted balance)and a credit to Allowance for Doubtful Accounts for $1,100 (which ends up with an adjusted balance of $1,000).

Using the Aging Approach,management Estimates That 10% of the $10,000