. Determine the appropriate adjustments needed to account for Bad Debts.

It's the end of May, 2007 and you are trying to determine how to adjust the Bad Debt Expense at month end.

Your sales information for the month of May, 2007:

Cash Sales $100,000

Credit Sales $350,000

Total Sales $450,000

The ledger account balances for A/R and AFDA before you've made any adjusting entries:

Accounts Receivable $110,000 DR

Allowance for Doubtful Accounts $1,000 DR

A.)Prepare month end adjusting entry using the Income Statement Approach. Assume you estimate Bad Debts to equal 1.5% of credit sales for the month.

B:)Prepare month end adjusting entry using the Balance Sheet Approach. Assume you estimate the Allowance for Doubtful Accounts to be 5% of Accounts Receivable