Brief Exercise 8-5

Sunland Company uses the percentage-of-receivables basis to record bad debt expense and concludes that3% of accounts receivable will become uncollectible. Accounts receivable are $435,700at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,653.

(a)

Prepare the adjusting journal entry to record bad debt expense for the year.(b)

If the allowance for doubtful accounts had a debit balance of $827 instead of a credit balance of $2,653, prepare the adjusting journal entry for bad debt expense.

(Credit account titles are automatically indented when amount is entered. Do not indent manually.)