In$-$Class Question $2$

Hirdt Co$.$ uses the percentage$-$of$-$receivables basis to record bad debt expense and concludes that $2\%$ of accounts receivable will become uncollectible. Accounts receivable are $$400,000$ at the end of the year, and the allowance for doubtful accounts has a credit balance of $$2,800.$

Instructions

$($a$)$ Prepare the adjusting journal entry to record bad debt expense for the year.

$($b$)$ If the allowance for doubtful accounts had a debit balance of $$900$ instead of a credit balance of $$2,800,$ prepare the adjusting journal entry for bad debt expense.