National Art is a new business.During its first year of operations,credit sales were $40,000 and collections were credit sales of $31,000.One account,$525 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

Quizplus · Accepted Answer

A)2% of credit sales ($40,000)= the adjustment (Credit)of $800 to the Allowance for Bad Debts account.Because the write-off of $525 is a debit to the Allowance account,the ending balance is $275.

National Art Is a New Business