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    Allowance for Doubtful Accounts

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    A company has $110,000 Accounts Receivable, $840,000 Sales and $40,000 Sales and Return Allowances.

    How would I journalize the following for December 31:

    Allowance for Doubtful Account credit balance of $2500 in the trial balance, assuming bad debts are 1% of net sales and 10% of accounts receivable.

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    Solution Preview

    The sales are $840,000 and Sales Returns and Alloawances are $40,000. The net sales are $800,000.

    1. Bad Debts are 1% of credit sales
    The amount would be 800,000X1% = $8,000
    The journal entry would be
    Bad Debt ...

    Solution Summary

    The solution explains the calculation of bad debt expense under percentage of sales and percentage of receivables method and the related journal entry.