A company has $96,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $860 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:
A. $2980
B. $3840
C. $860
D. $4700
E. None of these is correct.
Answer: D
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