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Caton China Corporation had credit sales of $610,000 for the year ended December 31, 2016, accounts receivable of $60,500, and a credit balance of $250 in the Allowance for Doubtful Accounts general ledger account at the end of the year.
Required:
- Record the bad debt expense for the year, using each of the following methods for the estimate:
- The allowance for doubtful accounts is to be increased to 4 per cent of accounts receivable.
- Bad debt expense is estimated to be 0.45 per cent of credit sales.
- The allowance for doubtful accounts is to be increased to $3,700, as indicated by an ageing schedule.
- Which method would you choose and why?
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