Glowra Company Uses the Allowance Method of Accounting for Debt

question 8

Multiple Choice

Glowra Company uses the allowance method of accounting for debt debts expense. At the beginning of the current year, the Allowance for Doubtful Accounts had a credit balance of $5,000 and the Accounts Receivable had a debit balance of $20,000. In the current year, an amount of $200 is determined to be uncollectible, and is recorded in the books correctly. Which of the following statements is true of the accounting treatment of the bad debts expense? ​

• A) The balances of Accounts Receivable and Allowance for Doubtful Accounts increase by $200.
• B) Adjusting entries for accounting the bad debts expense are made directly into the Bad Debts Expense account.
• C) The balances of Accounts Receivable and Allowance for Doubtful Accounts decrease by $200.
• D) No adjusting entries are made, and the bad debts expense is charged directly to the net profit account.

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