Answer:
Adjusting journal entry:
Dr Bad debt expense 19,000
Cr Allowance for doubtful accounts 19,000
Explanation:
accounts receivable balance = $380,000
total credit sales = $1,520,000
6% of accounts receivable will be bad debt = $380,000 x 6% = $22,800
credit balance allowance for doubtful accounts account = $3,800, and it must increase to $22,800 ⇒ $22,800 - $3,800 = $19,000
Adjusting journal entry:
Dr Bad debt expense 19,000
Cr Allowance for doubtful accounts 19,000
Allowance for doubtful accounts is a contra asset account with a credit balance that reduces the value of accounts receivable.
