Assume that Jackson Traders has $5 million in the account: Allowance for Doubtful Accounts at the beginning of the period. The managers believe that given the improved state of the economy this balance is too high and should be reduced by $1 million. What are the entries required to adjust this account to the new balance?

Credit Allowance for Doubtful Accounts - $1 million; Debit Bad Debt Expense - $1 million.

Credit Accounts Receivable - $1 million; Debit Cash - $1 million.

Debit Allowance for Doubtful Accounts - $1 million; Credit Bad Debt Expense - $1 million.

Credit Allowance for Doubtful Accounts - $1 million; Debit Accounts Receivable - $1 million.