At the end of each year, Deutch Supply Co. uses the simplified balance sheet approach (i.e., percent of accounts receivable) to estimate bad debts. On December 31, 2014, it has outstanding accounts receivable of $159,000 and estimates that 3.5% will be uncollectible.
Required
a. Give the entry to record bad debt expense for 2014 under the assumption that the Allowance for Doubtful Accounts has a $1,950 credit balance before the adjustment.
b. Give the entry under the assumption that the Allowance for Doubtful Accounts has a $1,950 debit balance before the adjustment.