Exercise 9-5 Percent of accounts receivable method LO P2

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 $88,500, 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 $1,505 credit balance before the adjustment.
(b)	a $443 debit balance before the adjustment.