Question - Lang Co. uses the percentage of receivables basis to record bad debts expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $421,700 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,470.
(a) Prepare the adjusting journal entry to record bad debts expense for the year.
(b) If the allowance for doubtful accounts had a debit balance of $819 instead of a credit balance of $1,470, determine the amount to be reported for bad debts expense.