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19 June, 11:40

Sage, Inc. had net sales in 2017 of $1,432,200. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $325,000 debit, and Allowance for Doubtful Accounts $3,000 credit. If Sage estimates that 8% of its receivables will prove to be uncollectible.

Prepare the December 31, 2017, journal entry to record bad debt expense.

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  1. 19 June, 11:41
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    Debit Bad debts expense $23,000

    Credit Allowance for Doubtful Accounts $23,000

    Explanation:

    At December 31, 2017,

    Bad debts is estimated:

    8% x $325,000 = $26,000

    Before adjusting, Allowance for Doubtful Accounts $3,000 credit. The company use aging method to estimate bad debts expense and Allowance for Doubtful Accounts. Bad debts expense amount will be record:

    $26,000 - $3,000 = $23,000

    The Journal entry:

    Debit Bad debts expense $23,000

    Credit Allowance for Doubtful Accounts $23,000
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