The following information is provided:

Unadjusted balance in Allowance for Doubtful Accounts $1,100 (debit)

Accounts Receivable, December 31 245,500

Sales Returns and Allowances 5,500

Sales 850,000

Sales Discounts 15,000

Required:

1. Prepare the adjusting entry if bad debts are estimated to be 1.5% of net sales.

2. Compute the amount of the adjusting entry if bad debts are estimated to be 3% of ending accounts receivable.