California cannery began 2008 with a debit balance in Accounts Receivable of $150,000 and a credit balance in Allowance for Doubtful Account of $7,500. During the year, California Cannery sold $1,300,000 of product and collected $1,350,000 from customers. In addition, $4,000 of the Accounts Receivable balance was written off as uncollectible during the year.
Management uses the allowance method to account for bad debts and believe that ultimately that 5% of the year-end balance in Accounts Receivable will not be collected.
How much Bad debt expense will be recorded in 2008?