Question

ABC company uses the allowance method to account for uncollectible accounts receivable. At the beginning of the year, the allowance for bad debts account had a credit balance of $1,000. During the year, ABC Co, wrote off $2,100 in bad debts, and recorded bad debt expense of $2,700. What is the year end balance in the allowance account?

Answer 1

Balance in the Allowance Account : $1600

Please see details below:

Step-by-step explanation:

When the company determined the bad debt balance, the company made the next entry to the accounting system.

Debit - Bad Debts Expense $1000

Credit - Allowance for Doubtful Accounts $1000

When the company write-off some debts it makes the next entry.

Debit - Allowance for Doubtful Debts $2.100

Credit - Accounts Receivable $2.100

When the company recorded bad debt expenses:

Debit - Bad Debts Expense $2700

Credit - Allowance for Doubtful Accounts $2700