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, company adjusted for bad debts expense using the aging method. The amount estimated as uncollectible was $25,000. The ending balance in the Allowance for Bad Debts would be:
A)$38.000.
B)$18,000.
C)$25,000.
D)$30,000.

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, company adjusted for bad debts expense using the aging method. The amount estimated as uncollectible was $25,000. The ending balance in the Allowance for Bad Debts would be:
A)$38.000. 
B)$18,000. 
C)$25,000. 
D)$30,000.

Quizplus · Accepted Answer

The credit sales amounting to $800,000 resulted in an increase in accounts receivable. Cash collected on credit sales amounted to $760,000, which reduced accounts receivable. An amount of $18,000 has been written off, which also reduces accounts receivable. The allowance for bad debts is a contra-asset account that is used to estimate and record the uncollectible portion of accounts receivable. The amount estimated as uncollectible using the aging method is $25,000. Therefore, the ending balance in the Allowance for Bad Debts would be $25,000.

At the Beginning of 2015, Peter Dots Has the Following