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On December 31st of current year, the trial balance of a company used in the percentage...

On December 31st of current year, the trial balance of a company used in the percentage of receivable method to estimate bad debt include the following: accounts receivable debit balance of $100,000, allowance for doubtful accounts credit balance of $1000. What amount should be debited to bad debt expense assuming a 5% of the outstanding accounts are uncollected?

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Answer #1

answer: $4000

Uncollected accounts are 5% of 10000

i.e, 10,000 * 5% = $5000

But already $1000 credit balance was in allowance for doubtful accounts. So the remaining i.e, $4000(5000-1000)

should be debited to bad debt expense

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