The ledger of the Patillo Company at the end of the current year shows Accounts Receivable \(\$ 80,000\); Credit Sales \(\$ 940,000\); and Sales Returns and Allowances \(\$ 40,000\).

\section*{Instructions}

(a) If Allowance for Doubtful Accounts has a credit balance of \(\$ 800\) in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be \(10 \%\) of accounts receivable.

(b) If Allowance for Doubtful Accounts has a debit balance of \(\$ 500\) in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be \(8 \%\) of accounts receivable.