llowance for Doubtful Accounts has a debit balance of $818 at the end of the yea
ID: 2473042 • Letter: L
Question
llowance for Doubtful Accounts has a debit balance of $818 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger indicates uncollectible receivables of $15,514. Which of the following entries records the proper adjusting entry for bad debt expense? Select the correct answer. debit Bad Debt Expense, $818; credit Allowance for Doubtful Accounts, $818 debit Bad Debt Expense, $16,332; credit Allowance for Doubtful Accounts, $16,332 debit Allowance for Doubtful Accounts, $15,514; credit Bad Debt Expense, $15,514 debit Bad Debt Expense, $14,696; credit Allowance for Doubtful Accounts, $14,696
Explanation / Answer
Answer:
Allowance for Doubtful Accounts = $818 (debit balance at the end of year before adjustment)
Uncollectible Receivables as per customer ledger = $15,514
Normally the Allowance for Doubtful Accounts has a credit balance.
If this account shows debit balance, it means the account is like overdrawing the balance.
To bring the balance of Allowance for Doubtful Accounts to $15,514 as analysis of customer ledger indicates, we need to add the amounts.
The following adjustment entry is to be passed to bring the Allowance for Doubtful Account to $15,514 (Credit Balance)
Bad Debt Expenses Dr. ($818 + $15,514) $16,332
To Allowance for Doubtful Account $16,332
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