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 credit sales of $33,000.One account for $675 was written off.Smart Art uses the ageing method to account for bad debts expense.It has estimated $275 as uncollectable at year-end.At the end of the year,what is the ending balance in the Bad debts expense account?
A)$6050
B)$275
C)$675
D)$950

Question

Quizplus · Accepted Answer

Using the ageing method, Smart Art estimates a total uncollectable amount of $275. However, it also had to write off one account for $675 during the year. Therefore, the total bad debts expense for the year is $950 ($675 + $275). Since the question asks for the ending balance in the Bad debts expense account, we can assume that there was no beginning balance in this account. Therefore, the answer is D) $950.

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