Question
In 2019, ABC Co began operations and sold $100 software licenses to 100 customers. Sales were made with 90 day credit terms. ABC estimated that
In 2019, ABC Co began operations and sold $100 software licenses to 100 customers. Sales were made with 90 day credit terms. ABC estimated that 6 customers would not pay the amount owed and established the appropriate allowance. Therefore, ABC Co ended 2019 with $600 in their Allowance for Doubtful Accounts. During 2020, ABC gave up on collecting from 8 customers they sold to in 2019 (so they wrote off the receivables). They also sold $100 software licenses to another 125 customers. As of year-end, ABC believes 5 of the 2020 customers who they have not yet collected from will not pay the amount owed. Prepare the required adjusting journal entry for uncollectible accounts for the end of 2020.
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