A trial balance before adjustment included the following:
Debit Credit
Accounts receivable $80,000
Allowance for doubtful accounts 730
Sales $340,000
Sales returns and allowances 8,000
Prepare the adjusting entries to record bad debt expense, assuming that the estimate of uncollectibles is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net sales.
What is the balance in the allowance for doubtful account (ADA) and the Net Realizable Value (NRV) under each of the estimates used above?