HANDOUT 3 ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS - PERCENTAGE OF CREDIT SALES RECEIVABLE METHOD Part 1 During Year 1, Vandelay Industries reported $300,000 in sales. The company's allowance for doubtful accounts has an unadjusted credit balance of $12,000. Based on prior experience, management estimates that 2.5% of sales will result in bad debts. Prepare the required adjusting journal entry. 31-Dec Allowance for Doubtful Accounts 4,500 To bad debt expense 4500 Ensure the oquation still balances and debits = credits Assets Liabilities Stockholders' Equity + Bad Debt Expense (E) - Allowance for Doubtfal Account (A) + To Bad debt 7,500 12,000 Opening Bal 4,500 To Balance Total 12,000 12,000 Part 2 Assume instead that the company's allowance for doubtful accounts has an unadjusted debit balance of $400. Prepare the required adjusting journal entry. Ensure the oquation still balances and debits = credits Assets Liabilities + Stockholders' Equity + Bad Debt Expense (E) - Allowance for Doubtfal Account (A) +