Question - Blue Spruce Corp. uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $402,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,723.
(a) Prepare the adjusting journal entry to record bad debt expense for the year.
(b) If the allowance for doubtful accounts had a debit balance of $904 instead of a credit balance of $2,723, prepare the adjusting journal entry for bad debt expense.