A company has an allowance for doubtful accounts with a credit balance of $1,500

Question

A company has an allowance for doubtful accounts with a credit balance of $1,500. The company's controller has prepared an aging schedule of accounts receivable, and from this schedule has determined that $5,000 in accounts will be noncollectable. Based on this information, which of the following is the correct adjusting entry?
a.(dr)Bad Debt Expense $3,500
(cr)Allownace for Doubtful Accounts $3,500

b. (dr)Bad Debt Expense $5,000
(cr)allowance for Doubtful Accounts $5,000

c.(dr)Bad Debt Expense $6,500
(cr)Allowance for Doubtful Accounts $6,500

d. no adjusting entry is necessary until the debtor actually defaults

Explanation / Answer

d. no adjusting entry is necessary until the debtor actually defaults

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