Assume that the accountant determines that $2,000 of the current accounts receiv
ID: 2553921 • Letter: A
Question
Assume that the accountant determines that $2,000 of the current accounts receivable will probably not be collected and that the Allowance for Doubtful Accounts currently shows a $200 debit balance.
Allowance for Doubtful Accounts
Current Balance 200
__1800_ Amount that must be added to the
Account to get the correct balance
2,000 Amount that should be in the account based on the estimate of bad debts
Now, the adjusting entry to record uncollectible accounts is:
If using the Allowance Method the income statement is impacted when writing off an account: ______ Yes or ____NO
Can someone explain? Thanks JC
Explanation / Answer
Adjusting entry to record uncollectible accounts: Bad debts expense 1800 =2000-200 Allowance for Doubtful Accounts 1800 When using the Allowance Method, the income statement is NOT impacted when writing off an account. The write off is against Allowance balance