Kwan Ltd. earned \(\$ 328,000\) in net credit sales during its first year of operation. At year-end, it had \(\$ 79,630\) in trade receivables and estimated that 10 percent of this amount may not be collectible in the future.

Required:

1. Compute the balance of the allowance for doubtful accounts at year-end, and prepare the adjusting journal entry to record bad debt expense.

2. Assume that the company estimated the uncollectible amount as 2.5 percent of its net credit sales. Prepare the adjusting journal entry to record bad debt expense, and compute the balance of the allowance for doubtful accounts at year-end.

3. What are the main differences between the two methods of estimating bad debt expense?