Based on its past collection experience, Ace Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2011, the allowance for doubtful accounts credit balance was $10,000. During 2011, Ace wrote off $18,000 of uncollectible receivables and recovered $5,000 on accounts written off in prior years. If net credit sales for 2011 totaled $1,000,000, the doubtful accounts expense for 2011 should be

Question

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The doubtful accounts expense is calculated as 2% of net credit sales, which is $1,000,000 * 0.02 = $20,000.

Based on Its Past Collection Experience, Ace Company Provides for Bad