A company uses the percentage of receivable approach to accounting for its receivable the company reserves 30% of the balance over 90 days, 20% of the balance 61-90 days and 10% of the balance 31-60 days. As of April 30 the company had 170,000 aged less than 30 days, 70,000 aged 31-60 days 40,000 aged 61-90 days and 20,000 over 90 days the current balance of the allowance account is 15,000. Which closing entry should the company make for the year-end financial statement?

1. Debit Bad credit expense 6,000; Credit Allowance for bad debt 6,000

2. Debit Bad credit expense 7,000; Credit Allowance for bad debt 7,000

3. Debit Bad credit expense 21,000; Credit Allowance for bad debt 21,000

4. Debit Bad credit expense 15,000; Credit Allowance for bad debt 15,000