Question

Broadway Company reported a balance in Accounts Receivable of $50,000 and a zero balance in the Allowance for Doubtful Accounts. The company’s aging of accounts receivable determined $12,200 to be uncollectible. Prepare the end-of-period adjusting entry to record bad debt expense.

Answer 1

Adjusting Journal

Doubtful Debt $ 12200 (debit)

Accounts Receivable $12200 (credit)

Step-by-step explanation:

When an amount is noncollectable from an Account Receivable,

The Assets of Accounts Receivable will decline as no future economic benefits are expected to be collected on the amount

The Expense Account - Doubtful Debts must be recognized to record the decrease in economic benefit which will decrease shareholders equity