Use the following information to answer the next three questions:

Alphas records disclosed the following information at its fiscal year ending December 31, 2008: Accounts Receivable: Not Yet Due - $300,000; 60 Days Past Due - $120,000; Over 60 Days Past Due - $20,000.

Allowance for Doubtful Accounts: $7,000 credit balance

Net Credit Sales for the Year: $4,000,000

Management estimates that 1% of its net credit sales will be uncollectible. Management also estimates that the percentage of accounts receivable that will prove to be uncollectible within the three age groups is: 2% for those not yet due, 8% for those 60 past due, and 20% for those over 60 days past due.

1. If management decides to use the balance sheet approach, what is the adjusting entry needed at 12/31/08 to record the uncollectible accounts receivable?

Select one:

a. Debit Bad Debt Expense and Credit Allowance for Doubtful Accounts for $12,600

b. Debit Bad Debt Expense and Credit Accounts Receivable for $12,600

c. Debit Allowance for Doubtful Accounts and Credit Accounts Receivable for $40,000

d. Debit Bad Debt Expense and Credit Allowance for Doubtful Accounts for $19,600

2. If management instead decides to use the income statement approach, what is the balance the Allowance for Doubtful Accounts AFTER the adjusting entry was posted to record the uncollectible accounts receivable at 12/31/08?

Select one:

a. $19,600

b. $40,000

c. $26,600

d. $47,000