After aging the accounts receivable, it is estimated that $800 will not be collected and the allowance account has a credit balance before adjustment of $200. The adjusting entry for estimating uncollectible account expense should be in the amount of_____?
To determine the amount for the adjusting entry for estimating uncollectible account expense, you need to consider the following information:
1. The estimated amount that will not be collected: $800
2. The credit balance in the allowance account before adjustment: $200
The adjusting entry for estimating uncollectible accounts expense is typically done using the allowance method. This method involves creating an allowance for doubtful accounts, which is a contra-asset account to accounts receivable. The purpose of this allowance is to reflect the estimated amount that the business expects will not be collected from its customers.
To calculate the adjusting entry, you need to determine the increase in the allowance account. This increase should be equal to the estimated amount that will not be collected.
In this case, the estimated amount that will not be collected is $800. However, you already have a credit balance of $200 in the allowance account. To determine the adjusting entry amount, you need to increase the allowance account by the difference between the estimated amount and the existing credit balance.
Adjusting entry amount = Estimated amount - Existing credit balance
= $800 - $200
= $600
Therefore, the adjusting entry for estimating uncollectible account expense should be in the amount of $600.