Question

An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If...

An aging of a company's accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for

Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a

a.

credit to Allowance for Doubtful Accounts for $4,000.
b.

debit to Bad Debts Expense for $1,800.
c.

debit to Bad Debts Expense for $4,200.
d.

debit to Bad Debts Expense for $3,000.
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Answer #1

The Answer is C. debit to Bad Debts Expense for $4,200.

Original Entry:

General Journal Debit Credit
Bad Debts Expense [3000+1200] $              4,200
Allowance for Doubtful Accounts $             4,200
(To record bad debts expense)

Allowance for Doubtful Accounts has $1,200 debit balance before entry. So, In order to make $3,000 credit balance in allowance account by year end, we have to credit $ 4,200 [$3,000 + $ 1,200]

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