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Crane, Inc. had net sales in 2020 of $1,488,400. At December 31, 2020, before adjusting entries, the balances in selected accounts were Accounts Receivable $206,300 debit, and Allowance for Doubtful Accounts $3,260 credit. If Crane estimates that 7% of its receivables will prove to be uncollectible. Prepare the December 31, 2020, journal entry to record bad debt expense.

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Answer:

Explanation:

The journal entry to record the bad debt expense is shown below:

Bad debt expense A/c Dr  $11,181

  To Allowance for doubtful debts  $11,181

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= (Accounts receivable × estimated percentage given ) - (credit balance of Allowance for Doubtful Accounts)

= ($206,300 × 7%) -  ($3,260)

= $14,441 - $3,260

= $11,181

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