Red Hat, Incorporated, is a software development company that recently reported the following amounts $($in thousands$)$ in its unadjusted trial balance as of February $28,2019.$

Debits Credits

Accounts Receivable $ $984,750$

Allowance for Doubtful Accounts $ $4,500$

Sales and Service Revenue $3,300,000$

Required:

$1.$Assume Red Hat uses $$ of $1$ percent of revenue to estimate its bad debt expense for the year. Prepare the adjusting journal entry required at February $28$ for recording Bad Debt Expense. Record the adjusting entry for bad debts expenses under the percentage of credit sales method

$2.$Assume instead that Red Hat uses the aging of accounts receivable method and estimates that $$5,000($thousand$)$ of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February $28$ for recording bad debt expense.

TIP: The aging of accounts receivable method focuses on calculating what the adjusted Allowance for Doubtful Accounts balance should be$.$ You need to consider the existing balance when determining the adjustment. Record the entry for bad debt expenses under the aging of accounts receivable method

$3.$Assume that the unadjusted balance in Red Hat's Allowance for Doubtful Accounts at February $28$ was a debit balance of $$1,000($thousand$).$ Red Hat uses the aging of accounts receivable method and estimates that $$5,000($thousand$)$ of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February $28$ for recording bad debt expense. Record the adjusting entry for bad debts as of February $28,$ using the aging of accounts receivable method.

$4.$If one of Red Hat$$s customers declared bankruptcy, what journal entry would be used to write off its $$500($thousand$)$ balance? Recrod the write$-$off of a $$500,000$ customer account, which is not collectable due to bankruptcy