On December 31, a company has outstanding accounts receivable of $69,000, and it estimates that 3% of its receivables will be uncollectible.

Prepare the adjusting journal entry at year-end to record bad debts expense if the Allowance for Doubtful Accounts has a:

1. $1,173 credit balance before the adjustment.
2. $345 debit balance before the adjustment.

Prepare the adjusting journal entry at year-end to record bad debts expense if the Allowance for Doubtful Accounts has a $1,173 credit balance before the adjustment.