Shenzhen Co. uses the percentage-of-receivables basis to record bad debts expense. It estimates that 1% of accounts receivable will become uncollectible. Accounts receivable are Y450,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of Y1,500.
(a) Prepare the adjusting journal entry to record bad debts expense for the year.
(b) If the allowance for doubtful accounts had a debit balance of Y800 instead of a credit balance of Y1,500 determine the amount to be reported for bad debts expense.