Allowance Method of Accounting for Bad Debts—Comparison of the Two
Kandel Company had the following data available for 2008 (before making any adjustments):
1. Prepare the journal entry to recognize bad debts under the following assumptions: (a) bad
debts expense is expected to be 2% of net credit sales for the year and (b) Kandel expects it will
not be able to collect 6% of the balance in accounts receivable at year-end.
2. Assume instead that the balance in the allowance account is a $2,600 debit. How will this affect
your answers to (1)?