explain steps

At the beginning of 2025 , Elliott, Inc. has the following account balances: Accounts Receivable - $40,000 (debit balance) Allowance for Bad Debts - $8,000 (credit balance) Bad Debts Expense - \$0 During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $790,000, and $15,000 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. $12,750 C. $8,000 D. $13,000