Could someone please explain this to me? I figured out that if you add up all th

Question

Could someone please explain this to me? I figured out that if you add up all the uncollectible A/R then subtract from Doubtful Accounts, you get 9,100. But I'm not so sure if this is the correct method, or why it is Uncollectible accounts expense. The answer is "uncollectible accounts expense of $9,100" on January 1, Dillon company had a $3,100 credit balance in the Allowance for Doubtful Accounts. During the year, sales totaled $780,000 and $6,900 of accounts receivable were written off as uncollectible. A December 31 aging of accounts receivable indicated the amount probably uncollectible to be $5,300. (No recoveries of accounts previously written off were made during the year.) Dillon's financial statements for the current year should include:

Explanation / Answer

They had a Credit balance of 3,100 at the beginning of the year. They wrote off 6,900. This would give them a Debit balance of 3,800, which is not the normal balance for the allowance account. After doing the aging, they know they should have a Credit balance of 5,300, but they have a Debit balance of 3,800. So to get from a debit of 3,800 to a credit of 5,300, they need to increase the account by 3800 + 5300 = 9100. This entry would be: Debit: Uncollectible account expense 9100 Credit: Allowance for doubtful accounts 9100 After this entry, they would have the appropriate Credit balance of 5300 in the allowance account.

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