Question - At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2015, it has outstanding accounts receivable of $95,000, and it estimates that 3% will be uncollectible.
Prepare the adjusting entry to record bad debts expense for year 2015 under the assumption that the Allowance for Doubtful Accounts has:
(a) a $1,615 credit balance before the adjustment.
(b) a $475 debit balance before the adjustment.