E7.7B (L0 3)(Recording Bad Debts) Rodriguez Company reports the following financial information before

adjustments:

Accounts Receivable - $25,000 (debit)

Allowance for Doubtful Accounts- $500 (credit)

Sales (all on credit) - $225,000 (credit)

Sales Returns and Allowances - $12,500 (debit)

Instructions

Prepare the journal entry to record Bad Debt Expense assuming Rodriguez Company estimates bad debts at

(a) 8% of accounts receivable and

(b) 8% of accounts receivable, but Allowance for Doubtful Accounts had a $1,000 debit balance.