Allowance Method of Accounting for Bad Debts—Comparison of the Two Approaches Kandel Company had the following data available for 2008 (before making any adjustments):

Required 1. Prepare the journal entry to recognize bad debts under the following assumptions:

(a) bad debts expense is expected to be 2% of net credit sales for the year and

(b) Kandel expects it will not be able to collect 6% of the balance in accounts receivable at year-end.
2. Assume instead that the balance in the allowance account is a $2,600 debit. How will this affect your answers to (1)?

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Accounts receivable, 12/31/08 Allowance for doubtful accounts Net credit sales, 2008 $320,100 (dr.) 2,600 (cr.) 834,000 (cr.)