Indy Sport and Hobby's Allowance for Doubtful Accounts had an unadjusted credit balance of $400.The manager estimates that $900 of the Accounts Receivable is uncollectible.Using the balance sheet approach,the year-end adjusting entry for Bad Debts Expense:

Question

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The correct adjusting entry to record the estimated uncollectible accounts would increase the Allowance for Doubtful Accounts to the estimated total of $900. Since there is already a $400 credit balance, an additional $500 (900 - 400) needs to be added. This is done by debiting Bad Debts Expense and crediting Allowance for Doubtful Accounts for $500.

Indy Sport and Hobby's Allowance for Doubtful Accounts Had an Unadjusted