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10 May, 03:10

RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment

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  1. 10 May, 03:57
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    The adjusting journal entry is as follows

    Bad Debts Expense Dr. $3,200

    To Allowance for Doubtful Accounts $3,200

    (Being the bad debt expense is recorded)

    The computation is shown below:

    = Account receivable balance * estimated percentage - credit balance of allowance for doubtful debts

    = $100,000 * 4% - $800

    = $4,000 - $800

    = $3,200
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