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28 March, 11:19

The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment of $500. The bad debts are estimated at 7% of $60,000, the outstanding accounts receivable. After the appropriate adjusting entry to recognize the bad debt expense, what will be the balance of the Allowance for Doubtful Accounts?

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  1. 28 March, 13:14
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    Estimated balance of Doubtful Account after adjusting entry = $4,200

    Explanation:

    Given:

    The credit balance of Doubtful Account = $500

    Computation of estimated balance of Doubtful Account after adjusting entry:

    Estimated balance of Doubtful Account after adjusting entry = 7% of $60,000

    Estimated balance of Doubtful Account after adjusting entry = $4,200

    After adjusting entry, Total amount credited in Allowance for Doubtful Accounts is $4,200
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