Question

Amount is 2900. ADA has a credit balance of 1750.81.

What would the adjusting entry for this look like?

22 Received legal notification from Benson, Rosenbrook, and Martinson, P.C., attorneys at law, that Stevenson College had filed bankruptcy and will be unable to pay any of its outstanding debts to its suppliers. Write off the account as a bad debt. ADA Bod Debt Ey • Remember that Waren Sports Supply uses the "Allowance" method rather than "Direct write-off" for accounting for bad debts.

Answer 1

In the adjusting entry, we will debit the allowance for doubtful accounts for the amount of uncollectible accounts. This is done for charging the uncollectible accounts' loss to the allowance account. This is called the write off entry. We will credit the accounts receivable account for the amount of uncollectible accounts to reduce the balance of accounts receivable. Required adjusting entry is:

Debit Allowance for doubtful accounts $2900

Credit Accounts receivable $2900

(for writing off uncollectible accounts)

After the above entry, the balance in allowance for doubtful accounts will be debit balance because total uncollectible accounts are more than the available credit balance. The updated balance after the above adjusting entry is below:

Balance in allowance for doubtful account = $1750.81

Less: Uncollectible accounts = ($2900)

Updated balance in allowance account = - $1149.19 or Debit balance of $1149.19