The trial balance before adjustment of XYZ Company reports the following balances: (2.5 points)

Dr. Cr.

Accounts receivable $100,000

Allowance for doubtful accounts $ 2,500

Sales (all on credit) 750,000

Sales returns and allowances 40,000

Instructions

Pass the journal entries for estimated bad debts assuming that doubtful debts accounts are estimated to be

(1) 6% of gross accounts receivable and

(2) 1% of net sales.