The trial balance before adjustment of Risen Company reports the following balances:

Cr.

$ 750,000

Dr.

Sales (all on credit)

Sales returns and allowances

Accounts receivable

Allowance for doubtful accounts

$40,000

100,000

2,500

Instructions

(a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated

to be 8% of gross accounts receivable. Please show your calculations.

(b) Assume that all the information above is the same, except that the Allowance for Doubtful

Accounts before adjustment has a credit balance of $9,000. How will this difference affect

the journal entries in part (a)?