E7-7.

(Recording Bad Debts)

(LO 3) Duncan Company reports the following financial information before adjustments.

	Dr.	Cr.
Accounts Receivable	$100,000
Allowance for Doubtful Accounts		$2,000
Sales Revenue (all on credit)		900,000
Sales Returns and Allowances	50,000

Instructions

Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 5% of accounts receivable and (b) 5% of accounts receivable but Allowance for Doubtful Accounts had a $1,500 debit balance.