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olasank [31]
3 years ago
6

During the​ year, credit sales amounted to​ $820,000. Cash collected on credit sales amounted to​ $780,000, and​ $15,000 has bee

n 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 in the Allowance for Bad Debts is​ ________.
Business
1 answer:
Katena32 [7]3 years ago
3 0

Answer:

The ending balance in the Allowance for Bad Debts is​ 20,500 CREDIT

Explanation:

The ending balance of Allowance for bad debts would be the 2.5% of sales

The adjustment is made to get the allowance for Bad Debt match the estimate uncollectible ammounts.

Notice it state <em>"company adjusted for bad debt expense"</em>

This means<u> it debit this account as much as it needed to be</u> to make allowance match the estimate allowance.

The write-off are transaction durign the period. They are irrelevant

So the ending balance is:

<em>2.5% of credit sales of 820,000 = $20,500</em>

It is important to remember that <u>Allowance is a counter-asset account</u>. His <em>normal balance is credit</em>, so the<u> final balance is credit.</u>

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