US Question 8 Not yet answered Marked out of 1.00 P Flag question Credit Losses Based on Percentage of Credit Sales Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at 1% of credit sales, which were $3,600,000 during the year. On December 31, the Accounts Receivable balance was $600,000, and the Allowance for Doubtful Accounts had a credit balance of $40,800 before adjustment. a. Determine the amount and financial statement effect of the adjustment to record the credit losses for the year. Note: Use negative signs with answers, when appropriate. Balance Sheet Income Statement Stockholders Equity Assets Liabilities + Revenues Expenses = Net Income b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet. Note: Do not use negative signs with any of your answers. Balance Sheet (excerpt) Current assets Cash S XX.XXX Inventory Other current assets - Total Current Assets X, XXX SXXX.XXX