On December 31, 2020, Corotel Company's year-end, the unadjusted trial balance included the following items:

AccountDebitCreditAccounts receivable$2,140,000Allowance for doubtful accounts37,000Sales ($3,210,000 cash sales)$12,840,000

Required:

1.Prepare the adjusting entry needed in Corotel's books to recognize bad debts under each of the following independent assumptions.

1. Bad debts are estimated to be 2% of credit sales.
2. An analysis suggests that 5% of outstanding accounts receivable on December 31, 2020, will become uncollectible