Prior to the Year-End Adjustment to Record Bad Debt Expense

question 93

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Prior to the year-end adjustment to record bad debt expense the ledger of Stickler Company included the following accounts and balances:

$\begin{array}{lccc}\text { Allowance for Doubtful Accounts} & \$1,000 \\ \text { Bad Debt Expense} & 0 \\\text { Accounts Receivable} & 200,000 \\\end{array}$
Cash collections on accounts receivable during 2010 amounted to $450,000.Sales revenue during 2010 amounted to $800,000,of which 75% was on credit,and it was estimated that 2% of the credit sales made in 2010 would ultimately become uncollectible.
Determine the balances of the allowance for doubtful accounts and bad debt expense after the adjusting entry to record bad debt expense was made.The allowance for doubtful accounts has a credit balance prior to the adjusting entry.

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Definitions:

Trade

The exchange of goods, services, or both between two or more parties, either within a country or internationally.

Price Fixing

An illegal practice where competing companies agree on selling prices of their products or services, rather than allowing market forces to set them.

Price Discrimination

A practice of charging different prices to different customers for the same product or service, where such differences are not justified by differences in cost.

Discounted Price

A reduced price offered on goods or services, typically to stimulate sales or clear out inventory.