Majestic Equipment Sales Company, which sells only on account, had a $136,000 balance in its Accounts Receivable and a $5,700 credit balance in its Allowance for Doubtful Accounts on December 31, 2019. During 2020, the company's sales of equipment were $836,000 and its total cash collections from customers were $791,000. During the year, the company concluded that customers with accounts totalling $6,500 would be unable to pay, and wrote these receivables off. However, one of these customers subsequently made a payment of $850. (Note that this amount is not included in the cash collections noted above.) At the end of 2020, management decided that it would use an estimate for bad debts of 1% of its credit sales. Account Tities and Explanation Debit Credit Accounts Receivable 836.000 Sales Revenue 836,000 (To record sales) Cash 791,000 Accounts Receivable 791,000 (To record cash collected from customers) Allowance for Doubtful Accounts 6.500 Accounts Receivable 6500 (To write off accounts receivable) Accounts Receivable 850 Allowance for Doubtful Accounts 850 (To reinstate an account that were previously written off) Cash 850 Accounts Receivable 850 (To record recovery of account that were previously written off) Bad Debts Expense 7.560 Allowance for Doubtful Accounts 7,560 (To recognize the bad debts expense) X Your answer is incorrect. What amount of bad debts expense would appear in the statement of income for the year ended December 31, 2020? Bad debts expense for year $ 7,560