the allowance for bad debts account has a debit balance of $8,000 before the adjusting entry for bad debts…

the allowance for bad debts account has a debit balance of $8,000 before the adjusting entry for bad debts expense. after analyzing the accounts in the accounts receivable subsidiary ledger, the companys management estimates that uncollectible accounts will be $14,000. what will be the amount of the adjustment in the allowance for bad debts account?\na. $20,000\nb. $21,250\nc. $14,000\nd. $22,000

the allowance for bad debts account has a debit balance of $8,000 before the adjusting entry for bad debts expense. after analyzing the accounts in the accounts receivable subsidiary ledger, the companys management estimates that uncollectible accounts will be $14,000. what will be the amount of the adjustment in the allowance for bad debts account?\na. $20,000\nb. $21,250\nc. $14,000\nd. $22,000

Answer

Explanation:

Step1: Understand the nature of Allowance for Bad Debts

Allowance for Bad Debts is a contra - asset account. A debit balance in this account means that the previous estimate was too low.

Step2: Calculate the adjustment amount

The desired ending balance of Allowance for Bad Debts is $14,000 (credit balance). Since there is a $8,000 debit balance before adjustment, the adjustment amount (A) can be calculated using the formula (A=\text{Desired ending credit balance}+\text{Existing debit balance}). Substituting the values: (A = 14000+8000)

Answer:

(A = 22000), so the answer is D. $22,000