Question

Allowance for Doubtful Accounts has a debit balance of $600 at the end of the year (before adjustment), and an analysis of accounts in the customer ledger indicates uncollectible receivables of $13,000.
1. Which of the following entries records the proper adjusting entry for bad debt expense?a. debit Bad Debt Expense, $12,400; credit Allowance for Doubtful Accounts, $12,400b. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600c. debit Allowance for Doubtful Accounts, $600; credit Bad Debt Expense, $600d. debit Bad Debt Expense, $600; credit Allowance for Doubtful Accounts, $600

Answer 1

Answer:

b. debit Bad Debt Expense, $13,600; credit Allowance for Doubtful Accounts, $13,600

Explanation:

Allowance for Doubtful Accounts is a contra asset account, It normally has credit balance but an adjustment may also make it's balance debit.

The uncollectible receivables of $13,000 means the there should be a credit balance in Allowance for Doubtful Accounts at the end of the period. This account already has debit balance of $600 which is also needs to be adjusted.

Total adjustment = $13,000 + $600 = $13,600