Problem

Assume that a company's bad debts are estimated and recorded as 2% of Accountreceivable.

Accounts receivable .... $125000

Sales revenue............$1280000

Previous balance of Allowance for doubtful accounts ..... $1600

75% of sales was made on credit.

a. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appearon the balance sheet after adjustment.

b. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.

c. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appearon the balance sheet immediately after writing off the account in part 2.