Average Art is a new business. During its first year of operations, credit sales were $40,000 and collections of credit sales were $36,000. One account, $650, was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. Prepare the entry to record bad debts expense.

Bad Debts Expense
Allowance for Bad Debts