A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.
Answer the following statement true (T) or false (F)
False
Desired balance in allowance:$80,000 × .06 = $4,800 credit
Current balance in allowance: 1,200 credit
Adjustment to allowance: $3,600 credit
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