National Art is a new business
During its first year of operations, credit sales were $50,000 and collections were credit sales of $32,000. One account, $625 was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. The ending balance of Allowance for Bad Debts account is ________.
A) $375
B) $1,000
C) $348
D) $1,628
A .2% of credit sales ($50,000 ) = the adjustment (Credit) of $1,000 to the Allowance for Bad Debts account. Because the write-off of $625 is a debit to the Allowance account, the ending balance is $375.
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