Company $Y$ had the following information in its trail balance before adjustments: sales $($on credit$)$ $$40,000$; accounts receivable $$19,500$; allowance for doubtful accounts $($credit balance$)$ $$500.$ The company estimates that $3\%$ of its receivables will be uncollectible. What amount of allowance for doubtful accounts will the company credit in its journal entry to record estimated bad debts?

$$85$

$$585$

The company will not credit the allowance since the amount of estimated bad debts does not exceed the existing balance

$$670$