Craigmont Uses the Allowance Method to Account for Uncollectible Accounts

question 77

Multiple Choice

Craigmont uses the allowance method to account for uncollectible accounts.Its year-end unadjusted trial balance shows Accounts Receivable of $104,500,allowance for doubtful accounts of $665 (credit) and sales of $925,000.If uncollectible accounts are estimated to be 0.5% of sales,what is the amount of the bad debts expense adjusting entry?

• A)$4,625
• B)$3,960
• C)$5,290
• D)$4,750
• E)$4,825

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Definitions:

Expected Value

The mean of all potential outcomes of a random variable, adjusted according to their individual probabilities of occurrence.

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Sealed-Bid

A bidding process where all bids are submitted confidentially to the auctioneer with no bidder knowing how much others have bid.

Lemons

In the context of economics, refers to products of lower quality that are difficult to distinguish from higher quality products before purchase. In a general context, it's a citrus fruit.