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 Assets = Liabilities + Stockholders' Equity Income Statement 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 XXXXXXX XXXX $XXX.XXX