Allowance for Doubtful Accounts Has a Credit Balance of $1,300

question 71

Multiple Choice

Allowance for Doubtful Accounts has a credit balance of $1,300 at the end of the year (before adjustment) . The company prepares an analysis of customers' accounts to estimate the amount of uncollectible accounts of $41,900. Which of the following adjusting entries would be made to record the Bad Debt Expense for the year?

• A) debit Allowance for Doubtful Accounts, $40,600; credit Bad Debt Expense, $40,600
• B) debit Allowance for Doubtful Accounts $43,200; credit Bad Debt Expense, $43,200
• C) debit Bad Debt Expense, $43,200; credit Allowance for Doubtful Accounts, $43,200
• D) debit Bad Debt Expense, $40,600; credit Allowance for Doubtful Accounts, $40,600

---

Definitions:

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Good

A tangible product or commodity that satisfies human wants or needs.

Resources

An input used to produce economic goods. Land, labor, skills, natural resources, and human-made tools and equipment provide examples. Throughout history, people have struggled to transform available, but limited, resources into things they would like to have—economic goods.

Demand Falls

This occurs when there is a decrease in the desire or willingness of consumers to purchase a good at a given price, leading to potential shifts in the market equilibrium.