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 ________.

Question

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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.

National Art Is a New Business