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Problem 1: Using the percent-of-receivables method, Prof. Shu Catering LLC. estimates uncollectible accounts will be 2% of $40,000 of Accounts Receivable. It has a debit balance in its Allowance for Bad Debts account of $150. What is the allowance for bad debts?
Option 1: 950
Option 2: Cannot be determined
Option 3: 150
Option 4: 800
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