Entries for Bad Debt Expense
Nairobi Corp Instructions
A) Prepare the Entries for Estimated Bad Debts

Entries for bad debt expense
Nairobi Corp.'s unadjusted trial balance includes the following balances:
$\begin{array}{llcc}& \text {Dr. } & \text { Cr. } \\ \text { Accounts receivable. } &\$150,000&\\ \text { Allowance for doubtful accounts . } &&\$3,500\\ \text {Sales (all on credit) } &&720,000\\ \text { Sales returns and allowances} &30,000&\\\end{array}$
Instructions
a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 5% of gross accounts receivable and (2) 2% of net sales.
b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $3,500 instead of a credit balance.