The Fox Company has been using 0.05 percent of net sales in providing for uncollectible accounts. The provision, however, has been inadequate since the allowance account shows a debit balance of \(\$ 1,272\) on December 31, \(19 X 0\) before making the annual provision for bad debts.

On December 31, 19X0, the Fox Company decides to switch to the aging method. On this date, the trial balance shows accounts receivable of \(\$ 74,000\). This total includes \(\$ 15,000\) of past due accounts and \(\$ 3,000\) of customer credit balances. Further investigation reveals that \(\$ 4,000\) of past due accounts represent advances to officers and \(\$ 2,000\) of past due accounts are worthless. In addition, it is found that the cash book was held open until January 2, 19X1 with the result that \(\$ 5,000\) of January collections on current accounts were entered as December cash receipts. Management estimates that past due accounts are 10 percent uncollectible and current accounts are 2 percent uncollectible.

Required:

a. Compute the bad debt provision at December 31, 19X0 under the aging method. Show computations.

b. Prepare the adjusting entries required at December \(31,19 \times 0\).