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Question: Massey Ltd uses the allowance method to record bad debts expense and concludes, using the percentage of accounts receivable method, that 1% of accounts receivable will become uncollectable. Accounts receivable are $500 000 at the end of the year, and the Allowance for Doubtful Debts has a credit balance of $3000.

(a) Prepare the adjusting journal entry to record bad debts expense for the year.

(b) If the Allowance for Doubtful Debts had a debit balance of $800 instead of a credit balance of $3000,
determine the amount to be reported for bad debts expense.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92577710

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