Novakowski Products needs to prepare their year-end financial statements. On December 31, 2021, the balance in Accounts Receivable was $680,000. An aging analysis of the accounts receivable indicated that $16,500 of the accounts receivable is expected to be uncollectible.

Instructions

a) Prepare the adjusting entries to record estimated bad debt expense using the percentage ofreceivables approach for each independent assumption:

i) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment.

ii) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment.

b)Determine the carrying amount of the accounts receivable at December 31, 2021 after therequired adjustments under each assumption.