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what bad debts expense entry would the chief accountant make at the end of the year 626346

The chief accountant of the business outlined in the example question is from the double-breasted, dull grey suit, old guard school of accounting. He argues that a customer’s account receivable should be written off as uncollectible when it becomes more than 30 days old. The normal credit term offered by the business to customers is 30 days. At the end of its first year, $278,400 of the company’s $645,000 accounts receivable is more than 30 days old. What bad debts expense entry would the chief accountant make at the end of the year if he had his way? Do you agree with his approach?

The president of the business outlined in the example question attends an industry update seminar at which the speaker says that the average bad debts experience of businesses in this field is about 1 percent of sales. Assume that the business adopts this method. Determine its bad debts expense for the first year and for the balances in its accounts receivable and allowance for doubtful accounts at the end of the year.

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