Lina Co. uses the percentage-of-receivables basis to record bad debts expense. It estimates that 1% of accounts receivable will become uncollectible. Accounts receivable are $200,000 at the end of the year, and the allowance for doubtful accounts has a debit balance of $500, the adjusting journal entry to record bad debts expense for the year includes:

Select one:

a. Credit to allowance for doubtful accounts $ 2,000.

b. Debit to bad debts expense $ 1,500.

c. Debit to bad debts expense $ 2,500.

d. Credit to allowance for doubtful accounts $ 1,500