Santana Rey, owner of Business Solutions, realizes that she needs to begin accounting for bad debts expense. Assume that Business Solutions has total revenues of $60,000 during the first three months of 2016 and that the AccountsReceivable balance on March 31, 2016, is $22,267.
a. Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense, which are estimated to be 1% of total revenues on March 31, 2016.
b. Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense,which are estimated to be 2% of accounts receivable on March 31, 2016.