Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates uncollectible receivables of $15,000. Which of the following entries records the proper adjusting entry for bad debt expense?

Question

Quizplus · Accepted Answer

The adjusting entry should increase the balance of the Allowance for Doubtful Accounts to the estimated amount of uncollectible receivables. Since the current balance of the allowance account is only $800, it needs to be increased by $15,000 - $800 = $14,200. This requires a debit to Bad Debt Expense for $14,200 and a credit to Allowance for Doubtful Accounts for $14,200, which is option B.

Allowance for Doubtful Accounts Has a Debit Balance of $800