The ledger of Patillo Company at the end of the current year shows Accounts Receivable $90,000; Credit Sales $840,000; and Sales Returns and Allowances $40,000.

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.