Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of credit sales. If credit sales are $556,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts

$15,880

Explanation:

The Bad Debt Expense = $16,680 ($556,000 x 3%)

This will be credited to the Allowance for Doubtful Accounts and debited to the Bad Debt Expense account.  When balancing the Allowance for Doubtful Accounts (the Uncollectible Accounts), the $800 debit balance will be netted off to arrive at $15,880 as the balance.

Allowance for Doubtful Accounts is a contra asset (Accounts Receivable) account.  It is a way for prudently providing for credit losses.  The Bad Debt Expense account is the account where the expense for uncollectibles for the period is charged.

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