At the beginning of 2017, Elixir, Inc has the following account balances
Accounts Receivable $40,000 (debit balance)
Allowance for Bad Debts $5,000 (credit balance)
Bad Debts Expense $0
During the year, credit sales amounted to $850,000. Cash collected on credit sales amounted to $760,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance in the Allowance for Bad Debts is ________.
A) $5,000
B) $3,250
C) $6,000
D) $8,250
D .Ending balance in the Allowance account = Beginning balance of Allowance for Bad Debts - Write offs + Bad Debt Expense for the year = $5,000 - $18,000 + $21,250 = $8,250
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