Shenzhen Co. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 1% of accounts receivable will become uncollectible. Accounts receivable are 420,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of 1,500.

(a) Prepare the adjusting journal entry to record bad debt expense for the year.

(b) If the allowance for doubtful accounts had a debit balance of 740 instead of a credit balance of 1,500, determine the amount to be reported for bad debt expense.

Please explain all steps detally. I want to learn solving this type of exercises. How did you find the answer and with the help of which rule did you solve this exercise?

Please send me the answer of this question in excel form to my mail: goodman24100