Mazie Supply Company uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $127,000, and it estimates that 2% 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 $2,159 credit balance before the adjustment. (b) a $635 debit balance before the adjustment.

(a) Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has a $2,159 credit balance before the adjustment.

(b) Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has a $635 debit balance before the adjustment.