The Allowance for Bad Debts Account Has a Debit Balance

question 20

Multiple Choice

The Allowance for Bad Debts account has a debit balance of $6,000 before the adjusting entry for bad debt expense. After analyzing the accounts in the accounts receivable subsidiary ledger, the company's management estimates that uncollectible accounts will be $10,000. What will be the amount of the adjustment in the Allowance for Bad Debts account?

• A)$15,250
• B)$10,000
• C)$14,900
• D)$16,000

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Definitions:

Journal Entry

A record of financial transactions in the accounting books of a business, indicating the accounts affected and the amounts.

Credits

Refers to the accounting entries that increase liabilities or decrease assets, representing the opposite effect of debits in double-entry bookkeeping.

Liability Accounts

Accounts on a balance sheet that represent obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Stockholders' Equity Accounts

These accounts represent the owners' residual interest in the corporation's assets after deducting liabilities.