A Company Had the Following Items and Amounts in Its

question 7

Essay

A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year:
$$\begin{array} { l l l } &\text { Debit } & \text { Credit } \\\text { Cash sales } & & \$ 188,000\\\text { Credit sales } & & 275,000 \\\text { Accounts receivable } & \$ 76,000 &\\\text { Allowance for doubtful accounts } & &1,000 \\\end{array}$$

Prepare the adjusting entry to estimate bad debts assuming bad debts are estimated to be 2.5% of credit sales.