A Newly Created Design Business Called Smart Art Is Just

question 126

Multiple Choice

A newly created design business called Smart Art is just finishing up its first year of operations. During the year, there were credit sales of $40 000 and collections of $36 000. One account for $650 was written off. Smart Art uses the percentage- of- sales method to account for Bad debts expense, and has decided to use a factor of 2% for their year- end adjustment of Bad debts expense. At the end of the year, what is the ending balance in Accounts receivable?

• A)$39 350
• B)$3 350
• C)$36 000
• D)$4 000

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Definitions:

Average Total Cost

The total cost divided by the quantity produced, reflecting the per unit cost of production.

Average Variable Cost

The variable cost per unit of output, which includes costs that vary with production, such as materials and labor.

Economic Profit

The net outcome of subtracting all expenses, both overt and hidden, from a corporation's aggregate earnings.

Short Run

A period during which at least one of a firm's inputs is fixed, limiting the firm's ability to adjust to changes in market demand or supply.