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Allowance for Doubtful Accounts

Please help me understand this problem. I do not understand the mythology when talking about Accounts Receivable and the Allowance for Doubtful Accounts.

On December 31, of the current year, a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance). Assume that this company's bad debts are estimated and recorded as 1.5% of credit sales.

1. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment.

2. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 2.

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On December 31, of the current year, a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance). Assume that this company's bad debts are estimated and recorded as 1.5% of credit sales.

1. Show how Accounts Receivable and the Allowance for Doubtful Accounts ...

Solution Summary

The solution explains the journal entries relating to allowance for doubtful accounts

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