[ellium]

I'm having difficulty figuring out part b of this question.. a breakdown of the required steps would be appreciated!


The following is information from the June 30, 2012 balance sheet of Echo Systems:

Accounts Receivable 920,000
Less: Allowance for Doubtful Accounts 27,000


(a) During July, Echo Systems recorded total sales of $800,000, all on credit. Collections during July were $520,000. Total receivables identified as being uncollectible and written off during July were $4,000. Echo Systems estimated bad debts as 2.0% of net credit sales.


(b) During August, total sales of $840,000 were recorded, all on credit. Collections during the month were $1,160,000. Total receivables identified as being uncollectible and written off during August were $7,000. Echo Systems changed its method of estimating bad debts to the balance sheet approach because the new accountant said it more accurately reflected uncollectible accounts. The resulting aging analysis determined total estimated uncollectible accounts on August 31, 2012 to be $40,000.

Record the end of month adjustments to record estimated bad debts.
a) 800,000 x 2% = 16,000
b) help!