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A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account...

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $800. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $7,000.

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Answer #1

Answer : False

as

Bad debt expense for adjusting entry will be = 6% of $90000 - $800 = $5400-$800 = $4800

So Debit to bad debt expense will be $4800 not $7000

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