Question

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $4,479. If Allowance for Doubtful Accounts has a $1,109 debit balance, the adjustment to record the bad debt expense for the period will require a

a. debit to Allowance for Doubtful Accounts for $5,588.
b. debit to Allowance for Doubtful Accounts for $4,479.
c. debit to Bad Debt Expense for $5,588.
d. credit to Allowance for Doubtful for $4,479.

Answer 1

c. debit to Bad Debt Expense for $5,588.

Step-by-step explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.

Since the estimate of uncollectible accounts totals $4,479. If Allowance for Doubtful Accounts has a $1,109 debit balance, the adjustments to be posted will be posted such that the balance in the doubtful debt account at the end of the year will be equivalent to the estimate of uncollectible accounts. This means that the amount to be posted

= $4,479 + $1,109

= $5,588

This will be posted as

Debit Bad debts $5,588

Credit Allowance for doubtful debt $5,588