Percentage of Credit Sales CORNERSTONE 5.2 Shanghai Company has credit sales of \(\$ 550,000\) during 2018 and estimates at the end of 2018 that \(2.5 \%\) of these credit sales will eventually default. Also, during 2018 a customer defaults on a \(\$ 775\) balance related to goods purchased in 2017. Prior to the write-off for the \(\$ 775\) default, Shanghai's accounts receivable and allowance for doubtful accounts (preadjustment) balances were \(\$ 402,000\) and \(\$ 129\) (credit), respectively.

Required:

1. Prepare the journal cntry to record the defaulted account.

2. Prepare the adjusting entry to record the bad debt expense for 2018 .

OBJECTIVE 4 Cornerstone Exercise