Smart Art is a new establishment.During the first year,there were credit sales of $45,000 and collections of credit sales of $32,000.One account for $550 was written off.The company decided to use the percentage of sales method to account for bad debts expense and decided to use a factor of 2% for their year-end adjustment of bad debts expense.The ending balance in Allowance for doubtful debts account would be:
A)$350.
B)$900.
C)$1529.
D)$249.

Question

Quizplus · Accepted Answer

The bad debts expense is calculated as 2% of credit sales, which is $45,000 * 2% = $900. The account written off is $550. Therefore, the ending balance in the Allowance for Doubtful Debts account is $900 - $550 = $350.

Smart Art Is a New Establishment