Zero Co Uses the Allowance Method of Accounting for Bad Debts

question 9

Essay

Zero Co. uses the allowance method of accounting for bad debts. TheirAllowance for Doubtful Accounts has a year-end credit balance, prior toadjustment, of $650. The bad debts are estimated at 3% of $560,000, the netcredit sales. Prepare the year end adjusting journal entry for bad debt expense.

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Definitions:

Soybeans

A type of legume native to East Asia, widely grown for its edible beans which are used in various food products and for oil.

Opportunity Cost

Opportunity cost is the cost of foregoing the next best alternative when making a decision, representing the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Truck

A motor vehicle designed to transport cargo or goods.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than its competitors, leading to more efficient trade.