Problem 2. The ledger of Garcia Company at the end of the current year shows accounts receivable $96,000; credit sales $780,000; and sales returns and allowances $40,000.

Instructions

(a) If Garcia uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Garcia determines that Allied's $900 balance is uncollectible.

(b) If allowance for doubtful accounts has a credit balance of $1,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.

(c) If allowance for doubtful accounts has a debit balance of $500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.