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Manning Company uses the allowance method. At the end of its first year of operations, the company estimates that it will not collect $2,500 of its accounts receivable. Prepare the appropriate adjusting journal entry to establish the estimate for uncollectible accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Final answer:

The appropriate adjusting journal entry to establish the estimate for uncollectible accounts is to debit the Allowance for Uncollectible Accounts and credit Accounts Receivable by the estimated amount of $2,500.

Step-by-step explanation:

The appropriate adjusting journal entry to establish the estimate for uncollectible accounts is as follows:



Allowance for Uncollectible Accounts $2,500

Accounts Receivable $2,500



This entry records an increase in the allowance for uncollectible accounts and a decrease in accounts receivable by the estimated amount of $2,500. This adjustment reflects the company's expectation of not being able to collect that amount from its customers. The allowance for uncollectible accounts is a contra asset account that reduces the reported value of accounts receivable on the balance sheet.

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