Outdoor living has the following accounts receivable at year end, broken down by age:

Current $150000

One month overdue. $40000

Two months overdue. $18000

Three months overdue. $8000

Prior experience has shown that the company will probably collect 95 per cent of its current receivables. Furthermore the collection percentage will fall by 15 per cent for each additional month an account receivable remains outstanding past its due date.

Develop an estimate of Outdoor livings allowance account balance and prepare the journal entry for bad debt expense, assuming that the allowance has an existing $4000 credit balance and $1000 debit balance.