Willis Company had $200,000 in credit sales for 2016,and it estimated that 2% of the credit sales would not be collected.The balance in Accounts Receivable at the end of the year was $38,000.Willis had never used the allowance method to account for its receivables till 2016.The net realizable value of its accounts receivable at the end of the year was $34,000.

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The net realizable value of accounts receivable is $34,000, which is less than the balance in Accounts Receivable of $38,000. This indicates that Willis Company has underestimated its bad debt expense.

Willis Company Had $200,000 in Credit Sales for 2016,and It