Credit losses Based on Credit Sales - Highland Company uses the allowance method of handling credit losses. It estimates losses at one percent of credit sales, which were $1,200,000 during the year. On December 31, the Accounts Receivable balance was $280,000 and the Allowance for Doubtful Accounts had a credit balance of $1,700 before adjustment.

a. Prepare the adjusting entry to record credit losses for the year.

b. Show how the Accounts Receivable account and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.