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The trial balance before adjustment of Risen Company reports the following balances: Accounts receivable Allowance for doubtful accounts Dr. Cr $300,000 $ 5,000 Instructions
The trial balance before adjustment of Risen Company reports the following balances: Accounts receivable Allowance for doubtful accounts Dr. Cr $300,000 $ 5,000 Instructions (a) Prepare the entry for estimated bad debts assuming that doubtful accounts are estimated to be 6% of gross accounts receivable. Show journal entry: (b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $5,000 instead of a credit balance. How will this difference affect the journal entry in part (a)? Show journal entry: (c) What is the theoretical justification for the percentage-of-receivables method used to estimate bad debts?
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