Record the adjusting entry for uncollectible accounts. Assume the balance of allowance for uncollectible accounts prior to the adjusting entry is 2,173 (credit). What is the effect of the adjusting entry on the allowance for uncollectible accounts?

A) Increase by 2,173
B) Decrease by 2,173
C) No change
D) Decrease by an amount equal to bad debts

The adjusting entry for uncollectible accounts would increase the allowance for uncollectible accounts by the amount of the estimated bad debts, which would be reflected as a debit to Bad Debts Expense and a credit to Allowance for Uncollectible Accounts.

Option A is the correct answer.

Explanation:

The adjusting entry for uncollectible accounts affects the balance of the allowance for uncollectible accounts. If the allowance has a credit balance of $2,173 prior to adjustment, and we assume the bad debts expense is estimated to be higher, we would increase the allowance for uncollectible accounts by the amount of the estimated bad debts expense.

The entry would be a debit to Bad Debts Expense and a credit to Allowance for Uncollectible Accounts for the estimated amount of uncollectible accounts. The effect of this entry on the allowance for uncollectible accounts would be an increase by the amount of the estimated bad debts.

Option A is the correct answer.