Allowance for Doubtful Accounts Has a Credit Balance of $500

question 114

Multiple Choice

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment) , and bad debt expense is estimated at 3% of net credit sales. If net credit sales are $300,000, the amount of the adjusting entry to record the estimated uncollectible accounts receivables is

• A) $8,500
• B) $8,500.
• C) $9,000.
• D) Cannot be determined

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account reducing total accounts receivable to reflect the amount that is expected to be uncollectible.

Income Statement Approach

The income statement approach is a method for preparing financial statements, focusing on calculating net income by summarizing revenues and expenses.

Allowance Account

An account used in accounting to estimate the portion of accounts receivable that may not be collectible.

Credit Balance

A Credit Balance occurs when the total credits in an account exceed the total debits, often indicating the amount owed to the customer or client in financial contexts.