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10 August, 23:04

As a result of a review and aging of accounts receivable in early January 2021, it has been determined that an allowance for doubtful accounts of $16300 is needed at December 31, 2020. What amount should Waterway record as "bad debt expense" for the year ended December 31, 2020?

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  1. 10 August, 23:51
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    Dr Bad debt expense 16,300

    Cr Allowance for doubtful accounts 16,300

    Explanation:

    The allowance for doubtful accounts is an estimate of the amount of accounts receivable that the company will probably not be able to collect. Once this amount is estimated, the company must record that amount as bad debt expense and allowance for doubtful accounts.

    Allowance for doubtful accounts is a contra asset account that reduces the value of accounts receivable, and needs to be adjusted as the estimate of uncollectible accounts changes.
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