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Crane Company uses the percentage of sales method for recording bad debts expense. For the year,...

Crane Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $590000 and credit sales are $2600000. Management estimates that 3% is the sales percentage to use. What adjusting entry will Crane Company make to record the bad debts expense?

Bad Debt Expense 78000
    Accounts Receivable 78000
Bad Debt Expense 17700
    Accounts Receivable 17700
Bad Debt Expense 17700
   Allowance for Doubtful Accounts 17700
Bad Debt Expense 78000
    Allowance for Doubtful Accounts 78000
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Answer #1

Correct answer-----------------

Bad debts expense $        78,000.00
        Allowance for doubtful accounts $       78,000.00

Working

Estimated balance of allowance for uncollectables (2600000 x 3%) $      78,000.00

Credit sales are used in percentage of Sales method to calculate bad debts expense.

In allowance method accounts receivable are not credited directly so accounts receivable will not be credited.

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