Schmaltz, Inc. records its allowance for doubtful accounts based on an analysis of receivables. The current, unadjusted balance in Schmaltz’s Allowance for Doubtful Accounts is a credit balance of $28,000. Based on a year-end aging of accounts receivables, Schmaltz determines that the allowance should be $98,000. What would be the journal entry to adjust the allowance?

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1 year ago

To determine the journal entry to adjust the allowance for doubtful accounts, you need to consider the current balance and the desired balance based on the year-end aging analysis.

1. Determine the adjustment amount:
The adjustment amount is calculated by subtracting the current balance from the desired balance.

Adjustment Amount = Desired Balance - Current Balance
Adjustment Amount = $98,000 - $28,000
Adjustment Amount = $70,000

2. Create the journal entry:
To adjust the allowance for doubtful accounts, you need to increase the balance by the adjustment amount. Since the current balance is a credit balance, you will need to debit the account.

The journal entry would be as follows:

Debit: Allowance for Doubtful Accounts $70,000
Credit: Bad Debt Expense $70,000

This journal entry increases the allowance by $70,000 and records the corresponding expense for bad debts.

Note: The specific account names may vary depending on the company's chart of accounts and terminology used.