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Modern Designs 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, $675​, 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​ ________.

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Answer:

$145

Explanation:

Calculation for the Bad debts expense for the first year of operations

First step is to find the 2% of credit sales to be uncollectible which is the amount of $41,000

2%×$41,000

=$820

Now let calculate for the Bad debts expense for the first year of operations

Bad debts expense =$820-$675 written off

Bad debts expense=$145

Therefore the Bad debts expense for the first year of operations will be $145

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