Percent of Sales Example Problem (Income Statement Method) On December 31, 2019, Arch Company had A/R of $120,000, a credit balance of $600 in the Allowance for Doubtful Accounts, and Sales of $1,000,000 for the year. 1. Prepare the December 31, 2019 adjusting entry to recognize bad debt expense assuming Arch uses the percentage of sales method of estimating bad debts and estimates bad debts to be 1% of sales. 2. During the 2020, Arch wrote off $12,000 of accounts receivables. Prepare the summary journal entry to record the write off of the accounts. 3. On September 12, 2020, Arch collected $1,000 on an account that was previous written off during the year. Record the entry(ies) to record the collection of this account. 4. Prepare the December 31, 2020 adjusting entry to recognize bad debt expense assuming Arch uses the percentage of sales method of estimating bad debts and estimates bad debts to be 1% of sales. Sales for 2020 were $1,400,000 and A/R had a balance of $180,000 on December 31, 2020. 5. After the December 31 adjusting entry, what is the balance in the Allowance for Doubtful Accounts? What is the net realizable value that gets reported in the balance sheet?