Question: Applying the allowance method (percent-of-receivables) to account for uncollectibles. The Accounts Receivable balance for Lake, Inc. at December 31, 2015, was $24,000. During 2016, Lake earned revenue of $452,000 on account and collected $330,000. Lake wrote off $6,200 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 3% of accounts receivable. Requirements
1. Assume Lake had an unadjusted $1,800 credit balance in Allowance for Bad Debts at December 31, 2016. Journalize Lake's December 31, 2016, adjustment to record bad debts expense using the percent-of-receivables method.
2. Assume Lake had an unadjusted $1,600 debit balance in Allowance for Bad Debts at December 31, 2016. Journalize Lake's December 31, 2016, adjustment to record bad debts expense using the percent-of-receivables method.