The year-end adjusting entry to recognize bad debts expense will act to:

A) increase assets and decrease equity.

B) decrease assets and decrease equity.

C) increase liabilities and increase equity.

D) decrease liabilities and increase equity.

On January 1, 2017 Grant Company had a $4,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2017, Grant provided $25,000 of service on account. The company collected $24,000 cash from account receivable. Bad debts are estimated to be 2% of sales on account.

The amount of bad debts expense to recognize on the 2017 income statement is:

A) $80.

B) $250.

C) $480.

D) $500.