The Pecking Order Theory of capital structure implies that (a) high-risk firms will end up borrowing more. (b) firms prefer internal finance. (c) firms prefer internal finance and firms prefer debt to equity when external financing is required. (d) firms prefer debt to equity when external financing is required. (e) firms pursue a targeted debt-equity ratio.

Exercise 7-7 martinez company reports the following financial information before adjustments. dr. cr. accounts receivable $168,900 allowance for doubtful accounts $3,200 sales revenue (all on credit) 849,300 sales returns and allowances 50,440 prepare the journal entry to record bad debt expense assuming martinez company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but allowance for doubtful accounts had a $1,550 debit balance. (if no entry is required, select "no entry" for the account titles and enter 0 for the amounts. credit account titles are automatically indented when the amount is entered. do not indent manually.)