Question

On June 30th (the end of the period) Brown Company has a credit balance of $2, 090 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper-balance should be $28, 215. Journalize the appropriate adjusting entry.

Answer 1

Answer:

The adjusting entry shall be

Doubtful Accounts Expense  Debit                        $ 26,125

   Allowance for Doubtful Accounts   Credit                           $ 26,125

Explanation:

In the question an evaluation was made on the required balance of allowance for doubtful accounts. This determination id done considering the ageing and quality of receivables.

Any shortfall in the Allowance for doubtful accounts is made up by debiting the Doubtful Accounts expense. Hence the differential between $ 28,215 and $ 2,090 is recorded as a year end adjustment.