The ledger of the Patillo Company at the end of the current year shows Accounts Receivable \(\$ 80,000\), Credit Sales \(\$ 940,000\), and Sales Returns and Allowances \(\$ 40,000\).

\section*{Instructions}

(a) If Allowance for Doubtful Accounts has a credit balance of \(\$ 800\) in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) \(1 \%\) of net credit sales, and (2) \(10 \%\) of accounts receivable.

(b) If Allowance for Doubtful Accounts has a debit balance of \(\$ 500\) in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) \(.75 \%\) of net credit sales and (2) \(8 \%\) of accounts receivable.