# Balloons Plus computes bad debt based on the allowance method. They determine their current year’s balance estimation to be a credit of \$84,000. The previous period had a credit balance in Allowance for Doubtful Accounts of \$26,000. What should be the reported figure in the adjusting entry for the current period? A. \$84,000 B. \$58,000 C. \$26,000 D. \$110,000

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 7MC
Textbook Problem
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## Balloons Plus computes bad debt based on the allowance method. They determine their current year’s balance estimation to be a credit of \$84,000. The previous period had a credit balance in Allowance for Doubtful Accounts of \$26,000. What should be the reported figure in the adjusting entry for the current period?A. \$84,000B. \$58,000C. \$26,000D. \$110,000

To determine

Concept introduction:

Allowance method:

Under the ‘Allowance method’, the estimated bad debts expenses are recorded using the ‘Allowance for doubtful account’ and the actual bad debts written off using this account. ‘Allowance for doubtful accounts’ represents the amount of expected bad debts or uncollectable accounts.This account is made as a provision for future bad debts.

Direct write off method:

Under the ‘Direct write off method’, the actual bad debts are directly written of using the accounts receivable account.

Aging of receivable method:

Bad debts expense can be recognized with several methods. Aging of receivable method is one of those methods. In this method the receivables are categorized into different categories according to the age and percentage of uncollectible is determined for each age and bad debts are calculated using these percentages.

Percent of sales method:

Bad debts expense can be recognized with several methods. Percent of sales is one of those methods. Under this method, the bad debts expense is calculated as a percentage of sales.

To choose:

The amount of adjusting entry in the current period.

### Explanation of Solution

The amount of adjusting entry in the current period is calculated as follows:

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