The Allowance for Bad Debts Account Has a Debit Balance

question 183

Multiple Choice

The Allowance for Bad Debts account has a debit balance of $8000 before the adjusting entry for bad debts expense.After analyzing the accounts in the accounts receivable subsidiary ledger using the aging-of-receivables method,the company's management estimates that uncollectible accounts will be $15,000.What amount of bad debts expense will be reported on the income statement?

• A) $4000
• B) $23,000
• C) $7000
• D) $15,000

---

Definitions:

Limited Partnership

A business structure where one or more general partners manage the business and are personally responsible for its debts, and one or more limited partners contribute capital but have limited liability.

Double Taxed

The situation where the same income is taxed twice, typically referring to corporate income taxed at both the corporate level and again when distributed as dividends to shareholders.

Tax Liability

The total amount of tax owed by an individual or business to a taxing authority like the government.

Incorporated Cooperatives

Organizations owned and operated by a group of individuals for their mutual benefit, which have been legally incorporated under state law.