National Art Is a New Business

question 4

Multiple Choice

National Art is a new business.During its first year of operations,credit sales were $50,000 and collections were credit sales of $32,000.One account,$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.The ending balance of Allowance for Bad Debts account is ________.

• A)$375
• B)$1,000
• C)$348
• D)$1,628

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Definitions:

Chattel Mortgage

A mortgage in which the title to a chattel owned by the debtor is transferred to the creditor as security for the payment of a debt.

Conditional Sales Contract

A contract arrangement in which the sale is conditional upon specific terms, with the transfer of ownership from the seller to the buyer occurring only after these conditions are met.

Title Transfer

The legal process of transferring ownership of a property or asset from one party to another.

Transaction

An exchange or transfer of goods, services, or funds between parties.