Niagara Art Is a New Business

question 117

Multiple Choice

Niagara Art is a new business.During its first year of operations,credit sales were $41,000 and collections of credit sales were $37,000.One account,$700,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.Bad debts expense for the first year of operations is ________.

• A)$120
• B)$820
• C)$700
• D)$1,560

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Definitions:

Semimonthly Wages

Wages that are paid twice a month, resulting in 24 pay periods within a year.

Self-Employment Taxes

Taxes that must be paid by individuals who work for themselves, covering Social Security and Medicare contributions.

Net Earnings

The amount of income left over after all expenses and taxes have been subtracted from total revenue, often referred to as net income.

FICA Withholding

The process of automatically deducting Social Security and Medicare taxes from an employee's paycheck, contributing to their future benefits.