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23 March, 00:14

All sales are made on credit. Based on past experience, the company estimates 2.5% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

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  1. 23 March, 00:44
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    Debit Bad Debts Expense $12,475

    Credit Allowance for Doubtful Accounts $12,475

    Explanation:

    Calculation for estimated bad debts expense:

    Explanation

    Accounts receivable * Sales uncollectible

    $445,000*0.025

    =11,125

    Hence:

    11,125 + Allowance for Doubtful Accounts 1,350

    =$12,475

    Therefore the estimated bad debt will be:

    Debit Bad Debts Expense $12,475

    Credit Allowance for Doubtful Accounts $12,475
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