Credit Losses Based on Percentage of Credit Sales

Lewis Company uses the allowance method of handling credit losses. It estimates losses at $1\%$ of credit sales, which were $$900,000$ during the year.

On December $31,$ the Accounts Receivable balance was $$150,000,$ and the Allowance for Doubtful Accounts had a credit balance of

$$10,200$ before adjustment.

a$.$ Determine the amount of the adjustment to record credit losses for the year.

Note: Use negative signs with answers, when appropriate.

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

Note: Do not use negative signs with any of your answers.