The Rock has credit sales of $500,000 during 2011 and estimates at the end of 2011 that 2 percent of these credit sales will eventually default. Also, during 2011 a customer defaults on a $1,800 balance related to goods purchased in2010.
Required:
1. Prepare the journal entry to record the defaulted balance.
2. Prepare the adjusting entry to record the bad debt expense for 2011.