At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2015, it has outstanding accounts receivable of $48,000, and it estimates that 6% will be uncollectible.

  

Prepare the adjusting entry to record bad debts expense for year 2015 under the assumption that the Allowance for Doubtful Accounts has:
(a)	a $816 credit balance before the adjustment.
(b)	a $240 debit balance before the adjustment.

Explanation:

(a)

Unadjusted balance	$	816	credit
Estimated balance ($48,000 × 0.06)		2,880	credit
Required adjustment	$	2,064	credit

  
(b)

Unadjusted balance	$	240	debit
Estimated balance ($48,000 × 0.06)		2,880	credit
Required adjustment	$	3,120	credit