Keegan Corporation's accounting records disclosed the following information for 2019: Cash sales Net credit sales $850,000 720,000 Accounts receivable (12/31/2019) 160,000 Allowance for doubtful accounts (12/31/2019, 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.