Nichols Company uses the percentage of accounts receivables method for recording bad debts expense. The month-end accounts receivable balance is $250,000. Management estimates that 4% of accounts...

Extracted text: Nichols Company uses the percentage of accounts receivables method for recording bad debts expense. The month-end accounts receivable balance is $250,000. Management estimates that 4% of accounts receivable will be not be collected in cash. The Allowance for doubtful accounts has a credit balance of $2,500 before adjustment. The adjusting entry that Nichols must make includes: O a. a debit to bad debt expense for $10,000. O b. a credit to the allowance for $30,000. O C. a credit to the allowance for $7,500. O d. a debit to bad debt expense for $40,000.