Applying the allowance method (percent-of-receivables) to account for uncollectibles The Accounts Receivable balance for Lake, Inc. at December 31, 2023, was $20,000.

During 2024, Lake earned revenue of $454,000 on account and collected $325,000 on account. Lake wrote off $5,600 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 5% of accounts receivable.

Requirements 

1. Assume Lake had an unadjusted $2,700 credit balance in Allowance for Bad Debts at December 31, 2024. Journalize Lake’s December 31, 2024, adjustment to record bad debts expense using the percent-of-receivables method.

2. Assume Lake had an unadjusted $2,400 debit balance in Allowance for Bad Debts at December 31, 2024. Journalize Lake’s December 31, 2024, adjustment to record bad debts expense using the percent-of-receivables method.