Problem: Bando Company has a $300,000 balance in Accounts Receivable and a $4,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bando uses a percentage of credit sales basis (at 2%) or a percentage of receivables basis (at 10%)?
% Credit Sales % Receivables
a. $36,000 $30,000
b. $40,000 $26,000
c. $36,000 $34,000
d. $32,000 $26,000