The Following Selected Amounts Are Reported on the Year-End Unadjusted

question 81

Multiple Choice

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit.Based on past experience,the company estimates 1% of credit sales 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 $19,750;credit Allowance for Doubtful Accounts $19,750.
• B)Debit Bad Debts Expense $15,225;credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $22,250;credit Allowance for Doubtful Accounts $22,250.
• D)Debit Bad Debts Expense $7,350;credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $21,000;credit Allowance for Doubtful Accounts $21,000.

---

Definitions:

Lender of Last Resort

A role usually performed by a central bank, providing funds to financial institutions facing financial difficulty to prevent systemic collapse.

Federal Reserve Board

The governing body of the Federal Reserve System, responsible for overseeing American monetary policy and financial system regulation.

Bank Failures

Occurrences when a bank is unable to meet its obligations to depositors or creditors and ceases operations, often resulting in regulators seizing the institution.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by massive unemployment and widespread poverty.