At the beginning of? 2017, Delicious? Drinks, Inc. has the following account? ba
ID: 2391477 • Letter: A
Question
At the beginning of? 2017, Delicious? Drinks, Inc. has the following account? balances:
Accounts Receivable $41,000 (debit balance)
Allowance for Bad Debts $5,000 ?(credit balance)
Bad Debts Expense? $0
During the? year, credit sales amounted to $850,000. Cash collected on credit sales amounted to $750,000?, and $16,000 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 3.5% The ending balance of Accounts Receivable is? ________.
OPTIONS:
A. 41,000
B. 57,435
C. 16,000
D. 125,000
If you could please include an explanation, that would be great!
Explanation / Answer
Answer)
My answer is option (D).
Here opening accounts receivable is $41000 and the outstanding collectables will be $84000($850000-$750000-$16000) combined makes$125000($41000+$84000) and allowance will be having balance of $7940((84000×3.5%)+$5000)
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