Question

Using the company's historical per cent of credit sales bad debts, $3,000 are estimated to be uncollectible. if allowance for doubtful accounts has a $800 debit balance, the adjustment to record bad debts for the period will require a _____

group of answer choices
A. debit to bad debt expense for $3,000.
B. debit to bad debt expense for $3,800.
C. credit to allowance for doubtful accounts for $800.
D. debit to bad debt expense for $2,200.

Answer 1

To adjust for estimated bad debts of $3,000 with an existing $800 debit balance in the allowance for doubtful accounts, a debit to bad debt expense for $3,800 is required, which accounts for both the new estimation and the correction of the previous underestimation.

Step-by-step explanation:

The subject of this question revolves around the accounting concept known as the allowance method for recording estimated bad debts. Specifically, if a company estimates that $3,000 are uncollectible from credit sales and the allowance for doubtful accounts has a debit balance of $800, the correct adjustment to record bad debts for this period would be option B. This involves a debit to the bad debt expense account for $3,800.

Here's why: the current debit balance reflects previously underestimated bad debts, thus the new estimate must not only cover expected future uncollectibles but also correct the past underestimation by adding $800 that were not accounted for earlier to the $3,000 newly estimated uncollectible, summing to a total of $3,800.