Asked by Trang Nguyen on May 07, 2024
Verified
Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment) , and an analysis of customers' accounts indicates uncollectible receivables of $12,900. Which of the following entries records the proper adjustment for bad debt expense?
A) debit Bad Debt Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000
B) debit Allowance for Doubtful Accounts, $14,000; credit Bad Debt Expense, $14,000
C) debit Allowance for Doubtful Accounts, $11,800; credit Bad Debt Expense, $11,800
D) debit Bad Debt Expense, $11,800; credit Allowance for Doubtful Accounts, $11,800
Allowance for Doubtful Accounts
A contra-asset account used to estimate the portion of accounts receivable that may not be collectible, reflecting potential losses due to credit sales.
Uncollectible Receivables
Debts owed to a company that are considered unlikely to be paid by the debtor.
Bad Debt Expense
An expense account reflecting the estimated amount of receivables that are expected not to be collected.
- Enumerate the steps for evaluating, reconfiguring, and obliterating uncollectible accounts receivable in bookkeeping records.
Verified Answer
TP
Trushil PatelMay 12, 2024
Final Answer :
A
Explanation :
The correct adjustment requires adding $14,000 to the Allowance for Doubtful Accounts to offset its existing $1,100 debit balance and reach the desired $12,900 credit balance. This is done by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts for $14,000.
Learning Objectives
- Enumerate the steps for evaluating, reconfiguring, and obliterating uncollectible accounts receivable in bookkeeping records.