A companys controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $1,500,000. The ending balance in accounts receivable was $300,000. An examination of the outstanding accounts at the end of the year indicates that approximately 7% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the allowance for bad debts is $4,000 (credit). Total accounts written off as uncollectible during the year were $15,000.

Which debit or credit is included in the adjusting entry to record bad debt expense for the year?

1. Credit allowance for bad debts for $21000

2. Debit allowance for bad debts for $25000

3. Credit allowance for bad debts for $17000

4. Debit allowance for bad debts for $15000