Wasson Corp Had the Following Items in Its Unadjusted Trial

Essay

Wasson Corp had the following items in its unadjusted trial balance at December 31:
$$\begin{array} { | l | r | r | } \hline & \text { Debit } & \text { Credit } \\\hline \text { Cash sales } & & \$ 77,000 \\\hline \text { Credit sales } & & 130,000 \\\hline \text { Accourts receivable } & \$ 56,000 & \\\hline \text { Allowance for doubtful } & & 500\\ \text { accounts } & & \\\hline\end{array}$$ Prepare the adjusting entry to estimate bad debts under each of the following independent situations. (Show all work.) (1) Bad debts are estimated to be 5% of credit sales. (2) An analysis shows that 6% of outstanding accounts receivable will not be collected.