At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000.Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts, respectively.

A) $19,500 and $25,000
B) $30,500 and $525,000
C) $19,500 and $525,000
D) $30,500 and $25,000

Question

Cathy Galloway · Accepted Answer

Final Answer : A, Explanation :  The adjusting entry for bad debt expense is determined by the desired balance in the Allowance for Doubtful Accounts minus the existing credit balance. The desired balance is $25,000, and the existing credit balance is $5,500. Therefore, the adjusting entry is $25,000 - $5,500 = $19,500. After the adjustment, the Allowance for Doubtful Accounts will have a balance of $25,000.

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