Keegan Corporations accounting records disclosed the following information for 2016:

Cash sales	$850,000
Net credit sales	720,000
Accounts receivable (12/31/16)	160,000
Allowance for doubtful accounts (12/31/16, prior to adjustment)	1,500	(debit)

Keegan wishes to examine the effect of various alternative bad debt estimation policies.

Required:

1.	Prepare the adjusting entry that would be required under each of the following methods:
a.	Bad debts are estimated at 3% of net credit sales.
b.	Bad debts are estimated at 7.5% of gross accounts receivable.
c.	An aging of accounts receivable indicates that half of the outstanding accounts will incur a 3% loss, a quarter will incur a 6% loss, the remaining quarter will incur a 20% loss.
2.	Next Level Discuss the difference between the income statement and balance sheet approaches to estimating bad debts.