The Unadjusted Trial Balance at Year-End for a Company That

question 71

Multiple Choice

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 3.5% of ending account receivable to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $13,975;credit Allowance for Doubtful Accounts $13,975.
• B)Debit Bad Debts Expense $15,225;credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $16,475;credit Allowance for Doubtful Accounts $16,475.
• D)Debit Bad Debts Expense $7,350;credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $17,350;credit Allowance for Doubtful Accounts $17,350.

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Definitions:

Economic Systems

The structure and methods by which a society allocates resources and distributes goods and services among its population.

Business Risk

The potential for financial loss or failure in the operation of a company due to factors like market conditions, regulatory changes, or operational challenges.

Market System

An economic model where investment, production, and distribution decisions are influenced by supply and demand, with the prices of goods and services being set in a free pricing system.

Circular Flow Diagram

A visual model used in economics to show how money moves through the economy in a circular manner between producers and consumers.