Question

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 ________. Do not round until the final answer. Then round to the nearest whole dollar.

Answer 1

The ending balance of Allowance for Bad Debts account is $800

Step-by-step explanation:

The computation of the ending balance of allowance for bad debt is shown below:

= Credit sales × uncollectible rate

= $40,000 × 2%

= $800

The estimated amount would be considered as an allowance for bad debts i.e $800, So no other amount would be come while computing the ending balance of Allowance for Bad Debts account.

However, the other information which is given in the question is not relevant. Hence, ignored it