Question Three: Balance sheet method-journal entries

The general ledger controlling account for Accounts Receivable has a balance of $120,500 at year-end before adjustment. The company uses the balance sheet approach to estimate uncollectible accounts. By aging the individual customers' accounts, it was determined that the doubtful accounts amounted to $5,020. Prepare the year-end adjusting entry for uncollectible accounts under each of the following independent assumptions.

(a.) Allowance for Doubtful Accounts has a credit balance of $2,850.

(b.) Allowance for Doubtful Accounts has a debit balance of $925.