Question

At the end of the current year, using the aging of receivable method, management estimated that $33,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $555. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A. Bad Debts Expense 33,750
Allowance for Doubtful Accounts 33,750
B Bad Debts Expense 33,195
Allowance for Doubtful Accounts 33,195
Accounts Receivable 34,305
Allowance for Doubtful Accounts 34,305
C. Bad Debts Expense 34,305
Allowance for Doubtful Accounts 34,305
D. Accounts Receivable 33,750
Bad Debts Expense 555
Sales 34,305

Answer 1

The adjusting entry that the company should make at the end of the current year to record its estimated bad debts expense is Bad Debts Expense 33,750 and Allowance for Doubtful Accounts 33,750.

Step-by-step explanation:

The adjusting entry that the company should make at the end of the current year to record its estimated bad debts expense is option A: Bad Debts Expense 33,750 and Allowance for Doubtful Accounts 33,750.

The aging of receivable method estimates the uncollectible amount based on the age of the accounts receivable. In this case, the estimated uncollectible amount is $33,750.

The Allowance for Doubtful Accounts is a contra asset account used to record estimated uncollectible amounts. Prior to any adjustments, it has a credit balance of $555. To record the estimated bad debts expense, we need to increase the allowance by $33,750, resulting in a $34,305 balance.

Answer 2

Adjusting entry the company should make at the end of the current year to record its estimated bad debts expense:

B Bad Debts Expense $33,195

Allowance for Doubtful Accounts $33,195

Step-by-step explanation:

At the end of the current year, uncollectible was estimated of $33,750.

The company uses the aging of receivable method to estimate uncollectible.

Before year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $555.

Bad debts expense = $33,750 - $555 = $33,195

Adjusting entry the company made at the end of the current year to record its estimated bad debts expense:

Bad Debts Expense $33,195

Allowance for Doubtful Accounts $33,195