Credit Losses Based on Credit Sales Lewis Company uses the allowance method for recording its

expected credit losses. It estimates credit losses at 2 percent of credit sales, which were $900,000 dur-

ing the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for

Doubtful Accounts had a credit balance of $12,200 before adjustment.

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

b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the

December 31 balance sheet.