At the end of the year, Mark Inc. estimates future bad debts to be $6,500. The Allowance for Uncollectible Accounts has a credit balance of $2,500 before any year-end adjustment. What adjustment should Mark Inc. record for the estimated bad debts at the end of the year?

Question

Fernanda Stein

Business

5 March, 09:43

At the end of the year, Mark Inc. estimates future bad debts to be $6,500. The Allowance for Uncollectible Accounts has a credit balance of $2,500 before any year-end adjustment. What adjustment should Mark Inc. record for the estimated bad debts at the end of the year?

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Ellen Moyer · Answer 1

The adjustment entry to record estimated bad debts is shown below:

Bad debt expense A/c Dr $4,000

To Allowance for Uncollectible Accounts $4,000

(Being record of estimated bad debts is made)

The computation of estimated bad debt is computed below:

= Estimated future bad debts - credit balance of Allowance for Uncollectible Accounts

= $6,500 - $2,500

= $4,000