Question No BD 1:
Company XYZ offers credit terms to its customers. At 31/12/2005, accounts receivable totaled $2,500,000. The allowance method is used to account for uncollectible accounts. At the beginning of the year, the allowance for uncollectible accounts had a credit balance of $68,000. $64,000 Accounts receivable written off during the year. No previously written off receivables were collected. The company estimates bad debts by applying a percentage of 2% to accounts receivable at the end of the year.
a. Prepare journal entries to record the write off of accounts receivables and the year end adjusting entry for bad debt expense.
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