At the Beginning of 2017,Elixir,Inc $\$ 40,000$ (Debit Balance)
Allowance for Bad Debts

question 124

Multiple Choice

At the beginning of 2017,Elixir,Inc.has the following account balances: Accounts Receivable $\$ 40,000$ (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 $760,000,and $18,000 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 2.5%.The ending balance in the Allowance for Bad Debts is ________.

• A)$5,000
• B)$3,250
• C)$6,000
• D)$8,250

---

Definitions:

Monopoly Power

The degree of control a company has over a market, enabling it to set prices or exclude competition.

Production Costs

The total expenses incurred in the manufacturing of a product or the providing of a service, including raw materials, labor, and overheads.

Economies of Scale

Economies of scale are cost advantages that entities achieve due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Elastic Market Demand

Describes how sensitive the overall market demand for a good or service is to price changes.