DEBIT CREDIT

Accounts receivable $140,800

Allowance for doubtful accts $2480

Sales revenue (all on credit) $816,800

Sales returns and allowances $53910

Prepare the journal entry to record bad debt expense assumingBuffaloCompany estimates bad debts at (a)4% of accounts receivable and (b)4% of accounts receivable but Allowance for Doubtful Accounts had a $1,540debit balance.

DEBIT CREDIT

A) Bad Debt Expense

Allowance for Bad Debt

B) Bad Debt Expense

Allowance for Bad Debt

I believe I have the journal entry titles correct, but I'm not sure how the sales returns and allowances figures into the problem. In other words do I just multiply the Accounts receivable figure by 4% or do you subtract sales returns and allowances from accounts receivable then multiply that figure by 4%