Munchener Corp.'s unadjusted trial balance includes the following balances:

  Accounts receivable Dr $150,000

  Allowance for doubtful accounts   Cr.  $ 3,500

    Sales (all on credit)  Cr. 720,000

    Sales returns and allowances 30,000

 Questions 

1. prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (a) 5% of gross accounts receivable and (b) 2% of net sales.
2.   Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $3,500 instead of a credit balance.