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    Adjusting entries to record bad debts expense

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    1. At December 31 of current year, a company reported the following:
    Total sales for the current year: $780,000 includes $160,000 in cash sales.
    Accounts receivable balance at Dec. 31, current year: $190,000.
    Bad debts written off during he current year: $6,800.
    Balance of Allowance for Doubtful Accounts at January 1, current year: $8,300.

    Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal:

    a) 1.5%of credit sales
    b) 5% of accounts receivable.

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    Solution Preview

    1. a) 1.5%of credit sales
    1.5% x ($780,000 - $160,000) = $9,300
    Bad Debt ...

    Solution Summary

    This solution is comprised of a detailed explanation to prepare the necessary adjusting entries to record bad debts expense.