At the beginning of 2019, Elliott, Inc. has the following account balances: $\begin{array}{lrr}
\text { Accounts Receivable \$ 41,000 } & \text {(debit balance)}\

\text { Allowance for Bad Debts\$ 6,000} & \text {(credit balance) } \

\end{array}$
Bad Debts Expense $0
During the year, credit sales amounted to $820,000. Cash collected on credit sales amounted to $780,000, and $15,000 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 ________.

Question

At the beginning of 2019, Elliott, Inc. has the following account balances: $\begin{array}{lrr}
  \text { Accounts Receivable  \$ 41,000 } & \text {(debit balance)}\

\text {  Allowance for Bad Debts\$ 6,000} & \text {(credit balance)  } \

\end{array}$
 Bad Debts Expense $0
During the year, credit sales amounted to $820,000. Cash collected on credit sales amounted to $780,000, and $15,000 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 ________.

Quizplus · Accepted Answer

The ending balance in the Allowance for Bad Debts is calculated by first determining the bad debts expense for the year, which is 2.5% of credit sales ($820,000 * 2.5% = $20,500). Then, adjust the Allowance for Bad Debts account by adding the bad debts expense and subtracting the write-offs. The starting balance was $6,000 (credit), $15,000 was written off (reducing the allowance), and $20,500 is added for the current year's expense. The calculation is $6,000 - $15,000 + $20,500 = $11,500.

At the Beginning of 2019, Elliott, Inc Bad Debts Expense $0 During the Year, Credit Sales Amounted

At the Beginning of 2019, Elliott, Inc Bad Debts Expense $0
During the Year, Credit Sales Amounted