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Credit Losses Based on Percentage of Credit Sales Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at
Credit Losses Based on Percentage of Credit Sales Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at 3% of credit sales, which were $2,700,000 during the year. On December 31, the Accounts Receivable balance was $450,000, and the Allowance for Doubtful Accounts had a credit balance of $30,600 before adjustment. a. Determine the amount and financial statement effect of the adjustment to record the credit losses for the year. Note: Use negative signs with answers, when appropriate. Balance Sheet Income Statement Stockholders' Assets Liabilities + Equity Revenues Expenses = Net Income b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet. Note: Do not use negative signs with any of your answers. Balance Sheet (excerpt) Current assets Cash Inventory Other current assets Total Current Assets $XX,XXX $ XXX,XXX X.XXX $XXX.XXX
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