Tanning Company Analyzes Its Receivables to Estimate Bad Debt Expense

question 142

Short Answer

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?

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Definitions:

Stakeholder Perspective

An approach to decision-making and governance that takes into account the interests and concerns of all those affected by a business's operations, including employees, customers, suppliers, community members, and shareholders.

Government Regulators

Authorities or agencies responsible for enforcing laws, regulations, and ensuring compliance within specific industries or sectors.

Secondary Stakeholder

A party that is indirectly affected by a company's activities but is not engaged in transactions with the company. Their interests may still impact the company's decisions.

Social Responsibility

Refers to the obligation of individuals and organizations to act for the benefit of society at large, balancing profit-making activities with activities that benefit the community.