Funnel Direct recorded $1,345,780 in credit sales for the year and $695,455 in accounts receivable. The company uses the Income Statement (percentage of credit sales) method to account for bad debts and estimates that 2% of credit sales. Record the year-end adjusting entry for bad debts under the following two assumptions:

A. There was a previous credit balance of $13,888 in Allowance for Bad Debts

B. There was a previous debit balance of $13,888 in Allowance for Bad Debts