Allowance for Doubtful Accounts Has a Credit Balance of $800

question 102

Multiple Choice

Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment) , and an analysis of accounts in the customer ledger indicates the estimated amount of uncollectible accounts should be $16,000. Based on the estimate above, which of the following adjusting entries should be made?

• A) debit Bad Debt Expense, $800; credit Allowance for Doubtful Accounts, $800
• B) debit Bad Debt Expense, $15,200; credit Allowance for Doubtful Accounts, $15,200
• C) debit Allowance for Doubtful Accounts, $800; credit Bad Debt Expense, $800
• D) debit Bad Debt Expense, $16,800; credit Allowance for Doubtful Accounts, $16,800

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Definitions:

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the owners' share.

Liabilities

Financial obligations or debts that a company owes to external parties, which must be paid back in the future.

Owner's Equity

The residual interest in the assets of a company after deducting all its liabilities, representing the ownership interest of shareholders.

Owner's Investments

Capital or assets that an owner puts into his company, enhancing the financial base of the business.