At December 31 of the current year, which is the fiscal year-end of DLM Incorporated, the following balances appeared in the general ledger, prior to adjusting entries:

Accounts Receivable $ 113,000 DR

Allowance for doubtful accounts 2,000 CR

Sales Revenue (1/2 of this total = credit sales) 400,400 CR

Sales Returns & Allowances (1/2 of this total relates to credit sales) 10,400 DR

Included in the Accounts Receivable are accounts to be written off in the amount of $2,500.

Required:

1. Prepare all of the necessary year-end adjusting entries under the assumption that it is estimated that two percent of outstanding customer receivables will not be collected.

2. If bad debts are estimated to three-quarters of one percent (.0075) of NET credit sales, indicate how your answer to part (1) would change just prepare the journal entry that would change!

3. Show how Receivables will be disclosed on the balance sheet as at December 31 for both parts (a) and (b).