Situation C: At the end of 2012, the unadjusted trial balance of Donovan, Inc. included $6,000,000 in accounts receivable, a credit balance of $50,000 in the allowance for doubtful accounts, and sales revenue (all on credit) of $200,000,000. Based on knowledge that the current economy is in distress, Donovan increased its bad debt rate estimate to 0.4 percent on credit sales. Use this information to answer the following: 1 What amount of bad debt expense should be recorded for 2012? 2 What amount will be reported on the 2012 balance sheet for the net realizable amount of accounts receivable, after being reduced by the balance in the allowance for uncollectible accounts?
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