S9-3 Applying the allowance method (percentage of sales) to account for bad debts During its first year of operations, Signature Lamp Company earned revenue of $350000 on account. Industry experience suggests that bad debts will amount to 2% of revenues. At 31 December 2016, accounts receivable total $40000. The company uses the allowance method to account for doubtful debts. Requirements 1 Journalise Signature's bad debts expense using the percentage of sales method. 2 Show how to report accounts receivable on the balance sheet at 31 December 2016. Follow the first reporting format illustrated on page 413. see below for format for reporting Net Accounts Receivable (page 413) Balance sheet (partial): Accounts receivable Less: Allowance for doubtful debts Accounts receivable, net $2 455 (217) $2 238