Question

At the end of 2018, we have a debit balance of $10,000 in allowance for doubtful accounts before the adjusting entry for bad debts expense. After analyzing the accounts in the accounts receivable using the aging of receivables method, the company's management estimates that uncollectible accounts will be $30,000. What will be the balance in allowance for doubtful accounts reported on our balance sheet?

Answer 1

Answer:

New Balance    

Allowance for Uncollectible Accounts   $ 30,000

Explanation:

Accounts receivable using the aging of receivables method    

Initial Balance    DEBIT

Allowance for doubtful accounts  $ 10,000  

Bad Debts Expense =   $ 30,000

Bad debt expense  $ 40,000  

Allowance for Uncollectible Accounts   $ 40,000

*The amount it's $40,000 because we have a Debit balance in the allowance for doubtful accounts which means the las entry was superior to our estimations.

New Balance    

Allowance for Uncollectible Accounts   $ 30,000