After writing off bad debts of $1800 the allowance for doubtful debts account balance was $600 credit. What is the correct general journal entry to record an adjustment to bring the allowance for doubtful debts to 10% of accounts receivable of $22 000?

Question

Quizplus · Accepted Answer

The correct adjustment requires increasing the allowance for doubtful debts to 10% of $22,000 (which is $2,200). Since the allowance already has a $600 credit balance, an additional $1,600 is needed to reach the $2,200 target. This is done by debiting Bad Debts Expense and crediting Allowance for Doubtful Debts, reflecting an increase in the expense and the allowance respectively.

After Writing Off Bad Debts of $1800 the Allowance for Doubtful