Required:

1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.
2. What amount of Bad Debt Expense should be recorded on December 31?
3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $600 debit balance, what amount of Bad Debt Expense should be recorded on December 31?

Last year, Pastis Productions reported $100,000 in sales and $40,000 in cost of goods sold. The company estimates it would have doubled its sales and cost of goods sold had it allowed customers to buy on credit, but it also would have incurred $50,000 in additional expenses relating to wages, bad debts, and interest. Should Pastis Productions extend credit? E8-7 COMPUTING BAD DEBT EXPENSE USING AGING OF ACCOUNTS RECEIVABLE METHOD LO8-2 Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) 1-30 days old, $12,000; (2) 31-90 days old, $5,000; and (3) more than 90 days old, $3,000. For each age group, the average loss rate on the amount of the receivable due to uncollectibility is estimated to be (1) 5 percent, (2) 10 percent, and (3) 20 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance was $800 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 2. What amount of Bad Debt Expense should be recorded on December 31? 3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $600 debit balance, what amount of Bad Debt Expense should be recorded on December 31