Answer:
                          DR.      CR.
(a)
Bad Debt Expense          $1,330
Allowance for Doubtful Accounts       $1,330
(b)
Bad Debt Expense          $6,870
Allowance for Doubtful Accounts       $6,870
Explanation:
Explanation:
a)
Allowance for Doubtful Accounts for the year = Closing Account receivable x Rate of Allowance = $132,500 x 4% = $5,300
Allowance for Doubtful Accounts already has credit balance of $3,970 so the net value of $1,330 ($5300- $3,970) is adjusted in the journal entry.
b)
As the Allowance for Doubtful Accounts already had debit balance of $1,570but we have to make it as $5,300 credit balance because this is the contra asset account which normally has credit balance.
Adjustment amount = $5,300 + $1,570 = $6,870
