The correct answer for this one is C. But why?

A company uses the balance sheet approach to determine the required balance in the Allowance for Doubtful Accounts account. Accounts receivables are $1 million. Management believes that an allowance of 3% is required. Currently, the bad debt expense account has a debit balance of $40,000. The journal entry to set up the required allowance includes: Select one: a. A credit to Allowance for Doubtful Accounts of $40,000. b. A credit to Allowance for Doubtful Accounts of $30,000. C. An amount which cannot be determined from the information given. d. A debit to Allowance for Doubtful Accounts of $10,000