At the beginning of 2015, Peter Dots has the following ledger balances: During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $760,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance of Accounts Receivable would be:
A)$40,000.
B)$62,000.
C)$80,000.
D)$18,000.

Question

At the beginning of 2015, Peter Dots has the following ledger balances:  During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $760,000, and $18,000 has been written off. At the end of the year, the company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance of Accounts Receivable would be:
A)$40,000. 
B)$62,000. 
C)$80,000. 
D)$18,000.

Quizplus · Accepted Answer

Starting balance of Accounts Receivable = $104,900
Credit sales = $800,000
Cash collected on credit sales = $760,000
Bad debts written off = $18,000

Total credit sales - Bad debts written off = $800,000 - $18,000 = $782,000

Bad debts expense = 2.5% x $782,000 = $19,550

Ending balance of Accounts Receivable = Starting balance + Credit sales - Cash collected - Bad debts written off - Bad debts expense 
= $104,900 + $800,000 - $760,000 - $18,000 - $19,550 
= $62,350

Therefore, the ending balance of Accounts Receivable would be $62,350, which is closest to option B: $62,000.

At the Beginning of 2015, Peter Dots Has the Following