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27 March, 18:08

Wellington Corp. has outstanding accounts receivable totaling $6 million as of December 31 and sales on credit during the year of $30 million. There is also a debit balance of $24,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense

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  1. 27 March, 18:15
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    Balance in allowance = $480,000

    Explanation:

    As per the data given in the question,

    Receivable totaling = $6 million

    Credit = $30 million

    Now the uncollectible amount is

    = $6,000,000 * 8%

    = $480,000

    After adjustment, the amount is

    = $480,000 + $24,000

    = $504,000

    Now the Adjusting entry is:

    Ba debts expense $504,000

    To allowance for doubtful debts $504,000

    (Being the bad debt expense is recorded)
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