The Accounts Receivable balance for Lagoon, Inc. at December 31, 2024, was $18,000. During 2025, Lagoon, Inc. earned revenue of $447,000 on account and collected $324,000 on account. Lagoon, Inc. wrote off $5,000 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 2% of accounts receivable. 

Requirements 

1. Assume Lagoon, Inc. had an unadjusted $2,400 credit balance in Allowance for Bad Debts at December 31, 2025. Journalize Lagoon, Inc.’s December 31, 2025, adjustment to record bad debts expense using the percent-of-receivables method. 

2. Assume Lagoon, Inc. had an unadjusted $2,000 debit balance in Allowance for Bad Debts at December 31, 2025. Journalize Lagoon, Inc.’s December 31, 2025, adjustment to record bad debts expense using the percent-of-receivables method.