A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40 000 and collections of $36 000. One account for $650 was written off. Smart Art uses the percentage- of- sales method to account for Bad debts expense, and has decided to use a factor of 2% for their year- end adjustment of Bad debts expense. At the end of the year, what is the balance in Bad debts expense?
A)$150
B)$1 450
C)$800
D)$250

Question

Quizplus · Accepted Answer

Bad debts expense is calculated as 2% of credit sales: 2% of $40,000 = $800.

A Newly Created Design Business Called Smart Art Is Just