Using the aging method, if uncollectible accounts are estimated at $700 and the allowance account balance is $490, what is the adjusting entry?

Using the aging method, if uncollectible accounts are estimated at $700 and the allowance account balance is $490, what is the adjusting entry?

• A. Debit the allowance account $210; credit the expense account $210
• B. Debit the expense account $700; credit the allowance account $700
• C. Debit the expense account $490; credit the allowance account $490
• D. Debit the expense account $210; credit the allowance account $490

Answer: (A)

Using the aging method, you adjust the allowance for doubtful accounts to match the estimated uncollectibles. The balance already in the allowance is 490, but the estimate calls for 700, so you need to increase the allowance by 210. This is done by debiting Bad Debt Expense for 210 and crediting the Allowance for Doubtful Accounts for 210. Posting this entry brings the allowance balance up to the 700 estimate and recognizes 210 of expense in the period, reflecting the cost of uncollectible receivables.

Using the aging method, you adjust the allowance for doubtful accounts to match the estimated uncollectibles. The balance already in the allowance is 490, but the estimate calls for 700, so you need to increase the allowance by 210. This is done by debiting Bad Debt Expense for 210 and crediting the Allowance for Doubtful Accounts for 210. Posting this entry brings the allowance balance up to the 700 estimate and recognizes 210 of expense in the period, reflecting the cost of uncollectible receivables.