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22 April, 16:34

During 2018, its first year of operations, Pave Construction provides services on account of $154,000. By the end of 2018, cash collections on these accounts total $107,000. Pave estimates that 25% of the uncollected accounts will be bad debts. Record the adjustment for uncollectible accounts on December 31, 2018.

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  1. 22 April, 16:52
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    Bad debts expenses Debit $ 11,750

    Allowance for uncollectible receivables Credit $ 11,750

    Explanation:

    The allowance for uncollectible accounts receivables balances are calculated as a percentage of the receivable balance.

    The receivable balances as at December 31, 2018 is

    Services provided on account $ 154,000

    Cash collections received $ 107,000

    Receivables from services uncollected $ 47,000

    Estimated percentage considered uncollectible 25 %

    Allowance for uncollectible accounts $ 47,000 * 25 % = $ 11,750
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