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

Dr.

Cr.

Accounts receivable

$150,000(DR)

Allowance for doubtful accounts

$3,500(CR)

Sales (all on credit)

720,000(CR)

Sales returns and allowances

30,000(DR)

Required

1.we need to make 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.