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13 April, 10:11

A company's Accounts Receivable balance at its December 31 year-end is $125,650, and its Allowance for Doubtful Accounts has a credit balance of $328 before year-end adjustment. Its net sales are $572,300. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debts expense is recorded at December 31? (A) $5,353 (B) $328 (C) $5,026 (D) $4,698 (E) $34,338

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  1. 13 April, 10:22
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    (D) $4,698

    Explanation:

    The journal entry to record the bad debt expense is shown below:

    Bad debt expense A/c Dr $4,698

    To Allowance for doubtful debts $4,698

    (Being bad debt expense is recorded)

    The computation of the bad debt expense is shown below:

    = (Accounts receivable * estimated percentage given) - (credit balance of Allowance for Doubtful Accounts)

    = ($125,650 * 4%) - ($328)

    = $5,026 - $328

    = $4,698
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