Question

# Using the allowance method, the uncollectible accounts for the year are estimated to be \$50,000. If...

Using the allowance method, the uncollectible accounts for the year are estimated to be \$50,000. If the balance for the Allowance for Doubtful Accounts is a \$9,000 credit before adjustment, what is the balance after adjustment?

A) \$9,000

B) \$41,000

C) \$50,000

D) \$59,000

The balance in Allowance for Doubtful Accounts after adjustment is (C) \$50,000

Computation:
Balance after adjustment: Existing balance + further amount of bad debt expense estimated => \$9,000 + \$(50,000 - \$9,000) = \$50,000

Explanation: Since the allowance for doubtful accounts has a credit balance of \$9,000, assuming such balance is leftover after the transfer of actual bad debt of previous year to accounts receivable a/c, it implies that the company has excessly provided for doubtful debt during the previous year and hence in order to bring the overall allowance for doubtful debts to anticipated level of \$50,000, the company may credit further amount of \$41,000 during current year