E8-3 (Algo) Recording, Reporting, and Evaluating a Bad Debt Estimate Using the Percentage of Credit Sales Method [LO 8-2) During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $145,000, of which $72,500 was on credit. At the start of 2021, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $550 credit balance. Collections of accounts receivable during 2021 amounted to $63,000 Data during 2021 follow: a. On December 10, a customer balance of $1,250 from a prior year was determined to be uncollectible, so it was written off b. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year. Required: 1. Give the required journal entries for the two events in December 2-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement 2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable