Allowance Method of Accounting for Bad Debts-Comparison of the Two Approaches Romero Corp. had the following data available for 2017 (before making any adjustments): Accounts receivable, 12/31/17 Allowance for doubtful accounts Net credit sales, 2017 Required: $314,600 2,600 844,000 1. Identify and analyze the adjustment to recognize bad debts under the following assumptions: (a) bad debts expense is expected to be 2% of net credit sales for the year. Activity Operating Allowance for Doubtful Accounts Increase, Bad Debts Expense Increase Accounts Statement(s) Balance Sheet and Income Statement Feedback How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. Balance Sheet Stockholders' Assets Liabilities + Equity No Entry X Bad Debts Expense X 14,400 X Income Statement Net Revenues Expenses Income Bad Debts Expense 14,400 X -14,400 X