Exercise 7-13 (Algo) Percent of accounts receivable method LO P3 Mazie Supply Company uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $85,000, and it estimates that 4% will be uncollectible. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has: (a) a $1,445 credit balance before the adjustment. (b) a $425 debit balance before the adjustment.

(a) Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has a $1,445 credit balance before the adjustment

(b) Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has a $425 debit balance before the adjustment.