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Guinevere Company has the following data extracted from its Accounts Receivable records at June $30,2011$

Customer Balance Current $31-75$ days Over $75$ days

A $ $8,000$ $ $5,000$ $ $2,000$ $ $1,000$

B $ $2,000-$ $ $2,000-$

C $ $4,000$ $ $4,000--$

D $ $9,000$ $ $2,000$ $ $1,000$ $ $6,000$

E $ $3,000$ $ $2,000-$ $ $1,000$

F $ $6,000$ $ $6,000--$

G $ $7,000$ $ $3,000$ $ $3,000$ $ $1,000$

Totals $ $39,000$ $ $22,000$ $ $8,000$ $ $9,000$

Guinevere's sales terms are $1/15$ n$/30$ and it records sales at the gross amount of the invoice.

Guinevere's year end is June $30$

The unadjusted balance in the Allowance for Doubtful Accounts at June $30$ is $$8,000$ dr$.$

Guinevere makes average sales of $$2,000,000$ per year and averages write offs of uncollectible balances of $$100,000$ per year.

Sales for the year ended June $30,2010$ are $$1,400,000$ credit sales and $$400,000$ cash sales

Guinevere has a very conservative receivables management strategy.

No adjusting entries have been recorded at June $30$

Assume that Guinevere does an aging analysis and adjusts its Allowance to a $$20,000$ credit balance on June $30$ and on July $4$ it reads in the Toronto Star that customer F has gone bankrupt. Guinevere should:

Multiple Choice

Make an entry debiting bad debt expense for $$10,000$

Say some unprintable words but make no accounting entry

Make an entry crediting bad debt expense for $$6,000$

Make an entry debiting bad debt expense for $$6,000$

None of the other are correct statements

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