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Ranch Company uses the allowance method of handling its credit losses. It estimates credit losses at 2.5 percent of credit sales, which were $2,700,000 during
Ranch Company uses the allowance method of handling its credit losses. It estimates credit losses at 2.5 percent of credit sales, which were $2,700,000 during the year. On December 31, the Accounts Receivable balance was $475,000, and the Allowance for Doubtful Accounts had a credit balance of $30,600 before adjustment.
- Prepare the adjusting entry to record the credit losses for the year.
- Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet.
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