Upon Completing an Aging Analysis of Accounts Receivable, the Accountant

question 126

Multiple Choice

Upon completing an aging analysis of accounts receivable, the accountant for Rosco Works prepared and aging of accounts receivable and estimated that $5,000 of the $98,000 accounts receivable balance would be uncollectible. The allowance for doubtful accounts had a $400 debit balance at year-end prior to adjustment. How much is bad debt expense?

• A) $5,000.
• B) $5,400.
• C)$4,600.
• D)$400.

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Definitions:

Sales-Type Lease

A lease arrangement where the lessor recognizes profits from both the sale of the leased asset and the interest on the lease payments.

Unguaranteed Residual Value

The estimated end-of-lease value of an asset that is not guaranteed by the lessee or a third party.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting selling, general, and administrative expenses.

Cost of Goods Sold

Cost of Goods Sold (COGS) is the direct costs attributed to the production of the goods sold by a company, including the cost of materials and labor.