Digital Corporation
the Following Data Concern Digital Corporation for 2012

question 69

Multiple Choice

Digital Corporation
The following data concern Digital Corporation for 2012.
$\begin{array}{ll}\text { Credit sales during the year } & \$ 2,400,000 \\\text { Accounts receivable--December } 31,2012 & 410,000 \\\text { Allowance for bad debts--December } 31,2012 & 55,000 \\\text { Bad debt expense for the vear } & 35,000\end{array}$
-Refer to the information provided for Digital Corporation. What are the effects on the accounting equation when Digital makes the adjustment to record bad debt expense using the allowance method?

• A) Assets increase and liabilities decrease
• B) Assets and equity decrease
• C) Assets increase and equity decreases
• D) Assets decrease and equity increases

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Definitions:

Degrees of Freedom

The number of independent values or quantities that can vary in an analysis without violating any constraints.

Hypothesis Test

A procedure in statistics to determine if there is enough evidence to reject a null hypothesis in favor of an alternative hypothesis.

Chi-square Distribution

A statistical distribution used particularly in hypothesis testing, derived from the sum of the squares of a set of variables that follow a normal distribution.

Critical Value

A point on the scale of the test statistic beyond which the null hypothesis is rejected.