Smart art is a new business. During its first year of operations, credit sales were $44,000 and collections from credit sales were $32,000. One account for $625 was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. What is the balance of accounts receivable at the end of the first year?

Question

Devan Hutchinson

Business

30 December, 23:53

Smart art is a new business. During its first year of operations, credit sales were $44,000 and collections from credit sales were $32,000. One account for $625 was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. What is the balance of accounts receivable at the end of the first year?

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Kiana Vance · Answer 1

Credit Sales = 44,000

Collections = 32,000

Initial accounts receivable = 12,000

Amount written off = 625

Account receivable after write off = 12,000 - 625 = 11,375

Un-Collectible = 2% of credit sales = 0.02*44,000 = 880

Final account receivable = Account receivable after write off - uncollectible = 11,375 - 880 = 10,495

Accounts receivable at the end of the first year = $10,495