A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 6% of outstanding receivables are uncollectible.The current credit balance (before adjustments)in the allowance for doubtful accounts is $800.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $7,000.

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Desired balance in allowance: $90,000 * .06 = $5,400 credit
Current balance in allowance: 800 credit
Adjustment to allowance: $4,600 credit

A Company Has $90,000 in Outstanding Accounts Receivable and It