Response to the following problem:
At each calendar year-end, Cabool Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2011, it has outstanding accounts receivable of $53,000, and it estimates that 4% will be uncollectible.
Prepare the adjusting entry to record bad debts expense for year 2011 under the assumption that the Allowance for Doubtful Accounts has
(a) a $915 credit balance before the adjustment and
(b) a $1,332 debit balance before the adjustment.