Craigmont Uses the Allowance Method to Account for Uncollectible Accounts

question 76

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 4% of accounts receivable,what is the amount of the bad debts expense adjusting entry?

• A)$4,845
• B)$4,180
• C)$3,515
• D)$3,700
• E)$3,850

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Definitions:

Option Expense

The cost associated with granting stock options to employees or executives, which companies must expense in their financial statements.

Fair Value Hedge

A hedging strategy aimed at protecting against the risk of changes in the fair value of an asset, liability, or an identified portion of such, that is attributable to a particular risk.

Foreign Exchange Risk

The potential for loss due to fluctuations in currency exchange rates affecting the value of foreign-denominated transactions and investments.

Mexican Pesos

The currency of Mexico, represented symbolically as MXN and used in financial transactions within the country.