Tanning Company Analyzes Its Receivables to Estimate Bad Debt Expense $\quad 17,000$

question 72

Multiple Choice

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?

• A)
• Bad Debt Expense \(\quad 17,000\)
• Allowance for Doubtful Accounts \(\quad 17,000\)
• B)
• Bad Debt Expense \( \quad 19,500 \)
• Allowance for Doubtful Accounts\( \quad 19,500 \)
• C)
• Bad Debt Expense \(\quad 22,000\)
• Allowance for Doubtful Accounts\(\quad 22,000\)
• D)Bad Debt Expense \(\quad\)\(\quad\)65,000
• Allowance for Doubtful Accounts\(\quad\)65,000

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Definitions:

Gestalt Principle

A theory in psychology that proposes the human brain organizes visual elements into groups or unified wholes when certain principles are applied.

Visual World

The aspect of the environment that can be perceived visually, encompassing everything that is visible to the eye.

Johannes Müller

A 19th-century German physiologist known for his contributions to the doctrine of specific nerve energies, which suggests that the nature of a sensation depends on which sensory fibers are stimulated.

Doctrine of Specific Energies

A theory suggesting that the nature of a sensation depends on which sensory fibers are stimulated, not on how they are stimulated.