Credit Losses Based on Accounts Receivable At December 31, the Selling Company had a balance of $740,000 in its Accounts Receivable account and a credit balance of $8,400 in the Allowance for Doubtful Accounts account. The accounts receivable T-account consisted of $750,000 in debit balances and $10,000 in credit balances. The company aged its accounts as follows:

Current	$608,000
060 days past due	88,000
61180 days past due	36,000
Over 180 days past due	18,000
	$750,000

In the past, the company has experienced credit losses as follows: 1% of current balances, 5% of balances 060 days past due, 15% of balances 61180 days past due, and 40% of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable. Required a. Prepare the adjusting entry to record the allowance for doubtful accounts for the year. b. Show how Accounts Receivable (including the credit balances) and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet. a.

General Journal
Date	Description	Debit	Credit
Dec.31	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable	Answer	Answer
	AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivabl	Answer	Answer
	To record allowance for credit losses.

b. (Do not use negative signs with your answers.)

	Current Assets:
	AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts		Answer
	AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts		Answer
			Answer
	Current Liabilities:
	Customers' Overpayments		Answer