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Shadow Corp. estimates its uncollectible accounts by aging its accounts receivable and applying percentages to various aged categories of accounts. Shadow computes a total of $26,880 in estimated losses from uncollectible accounts as of December 31, 2021 based on its aging analysis. Its Accounts Receivable account has a balance of $902,400 and its Allowance for Uncollectible Accounts has a credit balance of $3,840 before adjustment at December 31, 2021. How much bad debt expense will Shadow Corp report in 2021

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Answer:

the bad debt expense reported is $23,040

Explanation:

The computation of the bad debt expense reported is shown below:

= Estimated losses arise from uncollectible accounts - credit balance of allowance for uncollectible accounts

= $26,880 - $3,840

= $23,040

Hence, the bad debt expense reported is $23,040

The above formula should be used for calculating the bad debt expense