Novak Company has a credit balance of $3,210 in Allowance for Doubtful Accounts before adjustment. The total estimated uncollectibles under the percentage-of-receivables basis is $5,930. Prepare the adjusting entry to record bad debt expense.

Bad debt expense (Debit) : 2,720

Allowance for doubtful accounts (Credit) : 2,720

Explanation:

The adjusting entry to record bad debt expense is an entry to recognize the accounts receivables that are qualified as uncollectable, for the next accountable period. It is recognized like this: Bad debt expense (Debit) and Allowance for doubtful accounts (Credit).

At the end of each accountable period, the amount of Allowance for doubtful accounts must be calculated again, so an adjusting entry must be done between the difference in the final balance and the actually estimated uncollectibles.

In this particular case: 5.930 - 3,210 = 2,720