Accounts Receivables Valuation (under allowance method)

The ledger of Meteo Company at the end of the current year shows Accounts Receivable $420,000, Sales Revenue $920,000, and Sales Returns and Allowances $10,000.

Instructions: If Allowance for Doubtful Accounts has a credit balance of $3,000 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be

(1) 1.5% of net sales, and

(2) 8% of accounts receivable.

(c) If Allowance for Doubtful Accounts has a debit balance of $600 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.85% of net sales and (2) 6.5% of accounts receivable.