Question 2 - ABC Pty Ltd

At December 31 of the current year, ABC Pty Ltd reported the following:

• Total sales for current year: $780,000, includes $160,000 in cash sales.
• Accounts receivable balance at Dec. 31, current year: $190,000
• Bad debts written off during the current year: $6,800
• Balance of Allowance for Doubtful Accounts at January 1, current year: $8,300.

You must:

Prepare the necessary adjusting entries to record bad debts expenses assuming this company's bad debts are estimated to equal:

• 1.5% of credit sales
• 5% of accounts receivable.