Question

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts? Round to nearest whole dollar.

This is all the information provided.

Answer 1

In this case, the Debit balance of $2,000 in Allowance for Uncollectible Accounts Balance represents excess written off (this is done by debiting Allowance for uncollectible accounts and crediting Accounts Receivable account) of $2,000 than actually provided or Estimated.

Here we have to pass adjusting entry to remove Debit balance in allowance for uncollectible accounts by Debiting Bad debt Expense account and Crediting Allowance for uncollectible Accounts as follows

Debit Bad debts Expense $2000 Dr

Credit Allowance for Uncollectible Accounts $2000

(to Adjust Debit balance in Allowance for Uncollectible accounts)

So Balance After making Adjusting Entry will be

Bad debt Expense Account $2,000 Debit Balance

Allowance for Uncollectible Accounts $0.