Question

On December 31, 2012, Brooke’s Horse Stable’s unadjusted Allowance for Doubtful Accounts showed a debit balance of $432. An aging of the Accounts Receivable indicates probable uncollectible accounts of $1,000. The year-end adjusting entry for Bad-Debts Expense includes a

A. debit to the Allowance account for $568.
B. credit to the Allowance account for $42.
C. debit to the Allowance account for $822.
D. credit to the Allowance account for $1,432.

Answer 1

answer is credit ada $1432

Answer 2

D. Credit ADA $1432

ADA has a debit balance and needs to be adjusted to carry the desired credit balance estimate of $1000. Debiting BDE by $1432 (1000+432) and crediting ADA by the same amount will yield out the desired carrying balance of $1000 at the end of the period