Historical Art is a new business.During its first year of operations,credit sales were $55,000 and collections on credit sales were $33,000.One account of $500 was written off.Management uses the percent-of-sales method to account for bad debts expense and estimates 3% of credit sales to be uncollectible.The ending balance of Allowance for Bad Debts account is ________.
A) $1150
B) $1650
C) $645
D) $2625

Question

Quizplus · Accepted Answer

3% of credit sales ($55,000) = the adjustment (Credit) of $1650 to the Allowance for Bad Debts account. Because the write-off of $500 is a debit to the Allowance account, the ending balance is $1150.

Historical Art Is a New Business