Lathrop has a 5%, $40,000 note receivable from the sale of merchandise on January 1, 2020. The note was issued when the market rate was 5%. The note is due December 31, 2024. Annual interest is due each December 31. On December 31, 2020, Lathrop reviews the collectibility of its note and determines that there is a 30% probability of collecting $15,000 on the due date (and no further interest), and a 70% probability of collecting no further payments. What is included as part of the adjusting entry that Lathrop records on December 31, 2020?

a. Debit to Bad Debt Expense of $31,702.
b. Credit to Accounts Receivable for $25,798.
c. Credit to the Allowance for Doubtful Accounts for $35,500.
d. Debit to Bad Debt Expense of $36,298.

hi! I understand why it is bad debt exp of $36,298 but what happen to 70% probability of collecting no further payment? can you explain why ignore that part?