Tabby Corp.'s account balances at December 31, 2020, included Accounts Receivable, $ 192,500 debit; Allowance for Doubtful Accounts, $ 1,250 credit. From a review of the receivables, Blue estimates that $ 7,000 of the December 31 receivables will be uncollectible. The required adjusting entry would include a credit to the allowance account for
A) $ 1,250.
B) $ 8,250.
C) $ 7,000.
D) $ 5,750.

Question

Quizplus · Accepted Answer

The adjusting entry to record the estimated uncollectible accounts should bring the Allowance for Doubtful Accounts to the desired balance of $7,000. Since the account already has a credit balance of $1,250, an additional $5,750 ($7,000 - $1,250) credit is needed to adjust the balance to $7,000.