Question

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an analysis of accounts in the customer's ledger indicates Doubtful Accounts of $15,000. Which of the following entries records the proper provision for Doubtful Accounts?

(A) Debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts, $800
(B) Debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts, $14,200
(C) Debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense, $800
(D) Debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense, $15,800
(E) Debit Uncollectible Accounts Expense, $14,200; credit Accounts Receivable, $14,200

Answer 1

To adjust the Allowance for Doubtful Accounts to the analyzed amount of $15,000, a proper journal entry would involve debiting Uncollectible Accounts Expense and crediting Allowance for Doubtful Accounts by $14,200, which is the difference between the current credit balance and the required balance.

Step-by-step explanation:

The proper provision for Doubtful Accounts needs to reflect the necessary adjustment from the existing $800 credit balance in the Allowance for Doubtful Accounts to the analyzed indication of $15,000 in Doubtful Accounts. The correct journal entry would be to debit Uncollectible Accounts Expense and credit Allowance for Doubtful Accounts for the difference between the existing balance and the required balance. The suitable entry would be:

• Debit Uncollectible Accounts Expense $14,200
• Credit Allowance for Doubtful Accounts $14,200

This entry assumes that the $800 credit balance is already part of the Allowance for Doubtful Accounts, hence the additional amount needed to reach the total indicated doubtful accounts amount of $15,000 is $14,200 ($15,000 - $800 = $14,200).