After aging the receivables,Tim's Toys estimates that $900 will not be collected and the allowance account has a debit balance of $325.The adjusting entry would be for:

Question

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The correct adjusting entry is for $1,225. This is because the allowance account already has a debit balance of $325, which means it's underfunded by that amount. Adding the new estimate of $900 in uncollectible receivables, the total adjustment needed is $325 + $900 = $1,225 to correctly reflect the expected uncollectible receivables.

After Aging the Receivables,Tim's Toys Estimates That $900 Will Not