Question

A company ages its accounts receivables to determine its end of period adjustment for bad debts. at the end of the current year, management estimated that $26,250 of the accounts receivable balance would be uncollectible. prior to any year-end adjustments, the allowance for doubtful accounts had a debit balance of $725. what adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Answer 1

Bad Debts Expense 26,975

Allowance for Doubtful Accounts 26,975

Desired balance in allowance account: 26,250

Current balance: + 725 debit

Required: adjustment to allowance: $26,975 credit