Question 8

1. Rocky Products uses the allowance method [i.e., GAAP practice] in estimating uncollectible accounts. On December 31, 2020, an aging analysis of the accounts receivable indicates that $5,500 in accounts receivable are expected to be uncollectible. On the same day, Allowance for Doubtful Accounts has a credit [i.e., Right-hand-side] balance of $2,000 before adjustment. What are the journal entries required for Rocky to record the bad debt expense for 2020?

   	a.	(Dr.) Bad Debt Expense 5,500 (Cr.) Allowance for Doubtful Accounts 5,500
   	b.	(Dr.) Allowance for Doubtful Accounts 5,500 (Cr.) Bad Debt Expense 5,500
   	c.	(Dr.) Allowance for Doubtful Accounts 3,500 (Cr.) Bad Debt Expense 3,500
   	d.	(Dr.) Bad Debt Expense 3,500 (Cr.) Allowance for Doubtful Accounts 3,500