At the Beginning of 2019,Patriots Company Has the Following Account

question 155

Multiple Choice

At the beginning of 2019,Patriots Company has the following account balances: Accounts Receivable $40,000 (Debit)
Allowance for Bad Debts $7000 (Credit)
Bad Debts Expense $0
During the year,credit sales amounted to $810,000.Cash collected on credit sales amounted to $790,000,and $17,000 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 amount of bad debts expense for 2019 is ________.

• A) $20,250
• B) $41,000
• C) $17,000
• D) $10,250

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Definitions:

Operating Income

Earnings before interest and taxes (EBIT), an indicator of a company’s profitability from its core business operations.

Fixed Overhead

Costs that do not change with the level of output, including rent, salaries, and insurance premiums.

Administrative Costs

Expenses that are not directly tied to production or sales, such as office expenses, salaries of administrative personnel, and legal fees.

Incremental Income

The additional income that is generated as a result of a specific business decision or activity.