Question

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $22,500 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $600. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense

Answer 1

Answer: Please see explanation column

Explanation:

The adusting journal entry should be :

Accounts                                Debit                       Credit

Bad Debts Expense            $23,100

Allowance for Doubtful Accounts                          $23,100

Explanation

Estimated balance in allowance account  =$22,500

Allowance for Doubtful Accounts = debit of 600

adjustment to allowance= 22,500 +600 = $23,100