Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $600,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is

Question

Quizplus · Accepted Answer

The bad debt expense is estimated at 4% of $600,000, which is $24,000. Since the Allowance for Doubtful Accounts already has a debit balance of $500, the adjusting entry should be for the full $24,000 to bring the allowance to the correct estimated amount.

Allowance for Doubtful Accounts Has a Debit Balance of $500