Problem:

ABC at the end of the fiscal 2012 year has the following information: Credit Sales, $3,500,000 Sales Returns & Allowances $35,000 Accounts Receivable $200,000 and Allowance for Doubtful Accounts with a debit of $3,500.

Required:

Question 1: Prepare the general journal entry to record the end of the year adjusting entry if ABC uses 0.5% of Net Credit Sales as the basis for determining Bad Debt Expense.

Question 2: Prepare the general journal entry to record the end of the year adjusting entry if ABC uses 5% of Accounts Receivable as the basis for determining Bad Debt Expense.

Note: Please show the work not just the answer.