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2 September, 23:51

Mill Co.'s allowance for credit losses was $100,000 at the end of Year 2 and $90,000 at the end of Year 1. For the year ended December 31, Year 2, Mill reported credit loss expense of $16,000 in its income statement. What amount did Mill debit to the appropriate account in Year 2 to write off actual bad debts?

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  1. 3 September, 01:10
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    The amount worth $6,000 will be debited to the account in Year 2

    Explanation:

    When the uncollectible accounts are written off, then the debit is created to the allowance and the credit to the accounts receivable. The starting balance in the allowance account is $90,000 and the ending balance is $100,000 and the expense of bad debt is $16,000

    The write off is computed as:

    Write off = Beginning balance + Bad debt expense - Ending balance

    = $90,000 + $16,000 - $100,000

    = $106,000 - $100,000

    = $6,000

    Therefore, the amount of $6,000 is to be write off in Year 2
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