Chapter 9, Problem 6QC

During the year, Bernard Company had net credit sales of $45,000. At the end of the year, before adjusting entries, the balance in Accounts Receivable was $12,500 (debit) and the balance in Allowance for Bad Debts was $650 (credit). If the company uses an income statement approach to estimate bad debts at 5%, what is the ending balance in the Allowance for Bad Debts account?

Learning Objective 3

1. $1,275
2. $1,600
3. $2,250
4. $2,900