Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $137,500, and it estimates that 3% 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 $2,338 credit balance before the adjustment.


(b) a $688 debit balance before the adjustment.