Question

An aging company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If allowance for doubtful accounts has a $1,100 credit balance, the adjustment to record bad debts for the period will require a

a. Debit to Bad Debts Expense for $9,000.
b. Debit to allowance for doubtful accounts for $7,900.
c. Debit to bad debts expense for $7,900.
d. Credit to allowance for doubtful accounts for $9,000.

Answer 1

The correct adjustment to record bad debts when the estimated uncollectible receivables are $9,000 and there is already a $1,100 credit balance is a debit to Bad Debts Expense for $7,900.

Step-by-step explanation:

The student's question pertains to how to adjust the accounts for estimated uncollectible receivables in accounting, specifically regarding the debts considered bad. The correct entry to record the estimated bad debts would include a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts. Given that the Allowance for Doubtful Accounts already has a credit balance of $1,100, and the company is estimating $9,000 to be uncollectible, the amount needed to adjust the allowance to the new estimated total would be $7,900 ($9,000 - $1,100). Therefore, the adjustment would be a debit to Bad Debts Expense for $7,900, not the full $9,000 since we have to account for the existing balance in the allowance account.