Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $138,500, and it estimates that 5% 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 $2,355 credit balance before the adjustment.

(b) a $693 debit balance before the adjustment.