Pharoah $Co.$ uses the percentage$-$of$-$receivables basis to record bad debt expense and concludes that $2\%$ of accounts receivable will become uncollectible. Accounts receivable are $$406,000$ at the end of the year, and the allowance for doubtful accounts has a credit balance of $$3,420,$

$($a$)$

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Your answer is correct.

Prepare the adjusting journal entry to record bad debt expense for the year. $($List debit entry before credit entry. Credit account titles are automatically indented when the amount is entered. Do not indent manually.$)$

Account Titles and Explanation

Debit

Credit

Bad Debt Expense

$4700$

Allowance for Doubtful Accounts

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Solution

List of Accounts

Attempts: $4$ of $4$ used

$($b$)$

Your answer is partially correct.

If the allowance for doubtful accounts had a debit balance of $$960$ instead of a credit balance of $$3,420,$ prepare the adjusting journal entry for bad debt expense $($List debit entry before credit entry. Credit account titles are automatically indented when the amount is entered. Do not indent manually.$)$

Account Titles and Explanation

Debit

Credit

Bad Debt Expense

Allowance for Doubtful Accounts