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Problem statement: The Splendor in the Grass Corporation provides $6000 worth of lawn care on account during the month. Experiences suggests that about 2 % of net credit sales will not be collected. According to the revenue recognition principle and the matching principle, the company should

a) wait until the accounts are determined to be uncollectible before making an entry for bad debt expense

b) record an estimate of bad debt expense in the same period as the lawn care is provided

c) not report the sales revenue until it collects payment

d) increase the value of its liabilities with an adjustment

Accounting Basics, Accounting

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