Question

If a company uses the allowance method for uncollectible accounts, then the entry to record $800 of estimated uncollectibles is

Answer 1

The entry to record $800 of estimated uncollectibles using the allowance method for uncollectible accounts is a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

Step-by-step explanation:

The entry to record $800 of estimated uncollectibles using the allowance method for uncollectible accounts would be:

Debit: Bad Debt Expense $800

Credit: Allowance for Doubtful Accounts $800

The entry increases the Bad Debt Expense account to reflect the estimated uncollectible accounts and creates a contra-asset account called Allowance for Doubtful Accounts.

Answer 2

In the allowance method for uncollectible accounts, $800 of estimated uncollectibles is accounted for by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts, impacting both the income statement and balance sheet.

Step-by-step explanation:

When a company uses the allowance method for uncollectible accounts, the estimated uncollectibles are recorded as an adjusting entry. This entry includes a debit to the Bad Debt Expense account and a credit to the Allowance for Doubtful Accounts, which is a contra asset account. The entry does not immediately write off specific accounts but anticipates the estimated amount of accounts that will be uncollectible in the future.

The journal entry to record the $800 of estimated uncollectibles would be:

• Debit Bad Debt Expense $800
• Credit Allowance for Doubtful Accounts $800

This entry will increase the expense on the income statement, representing the cost of the estimated future losses due to uncollectible accounts, and increase the allowance for doubtful accounts on the balance sheet, which reduces the net amount of accounts receivable to the amount that is expected to be collected.