ACCOUNTING 3351-Max Corporation is closing its accounting books

Max Corporation is closing its accounting books and records for the year 2015. All sales at Max aremade on credit. The unadjusted trial balance of the company includes the following balances at 31December 2015:Dr. Cr.Sales returns and allowances ………………………………………………….. $22,500?dr?Sales …………………………………………………………………………………… $ 510,000?cr?Allowance for doubtful accounts …………………………………………… 2,625?cr)Accounts receivable ……………………………………………………………… 112,500DrDuring the year, Max Corp. estimates bad debt expense and the allowance for doubtful accounts using apercentage of sales, and then, at year-end, after a careful and detailed analysis of the collectability ofaccounts receivable, adjusts the balance of the allowance for doubtful accounts.Required:1. Prepare and present the entry for estimated bad debts and the allowance for doubtful accounts for theyear assuming that doubtful accounts are estimated to be 1% of net sales.2. After the entry in 1 above relating to the estimate is made, Max performs a detailed analysis of theaged accounts receivable and determines that an allowance for doubtful accounts of $6,000 isrequired based on that analysis in order to finalize the allowance for doubtful accounts on the 31December 2015 statement of financial position. Present the entry, if any is necessary, to make thisadjustment.3. Assume that all the information above about Max’s procedures and balances is the same, except thatthe allowance for doubtful accounts has an unadjusted debit balance of $2,625 instead of a creditbalance of $2,625. Re-calculate the requirements presented in 1 and 2 above using this alternativebalance in the allowance for doubtful accounts.