At December 31 of the current year, a company reported the following: Total sales for the current year: $980,000 includes $160,000 in cash salesAccounts receivable balance at Dec. 31, end of current year: $160,000Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 creditBad debts written off during the current year: $5,800.Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.
What will be an ideal response?
| Dec. 31 | Bad Debts Expense.......................................... | 6,500 | ? |
| ? | Allowance for Doubtful Accounts**.......... | ? | 6,500 |
| **Required balance ($160,000 * 5%)..................................... | $8,000 |
| Balance before adjusting entries ($7,300-$5,800).................... | 1,500 |
| Required adjustment................................................................ | $6,500 |
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