Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on this estimate, which of the following adjusting entries should be made?
A) debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
B) debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
C) debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
D) debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800

Question

Quizplus · Accepted Answer

Bad debt expense = Uncollectible accounts estimate - Unadjusted allowance for doubtful accounts = $16,000 - $800 = $15,200
Bad Debt Expense 15,200
Allowance for Doubtful Accounts 15,200
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Allowance for Doubtful Accounts Has a Credit Balance of $800