Before Adjustment,the Allowance for Doubtful Accounts Has a Credit Balance

question 97

Multiple Choice

Before adjustment,the allowance for doubtful accounts has a credit balance of $2,700.The company had $140,000 of net credit sales during the period and historically fails to collect 4% of credit sales.The company uses the percentage of credit sales method of estimating doubtful accounts.After adjusting for estimated bad debts,the ending balance in the allowance for doubtful accounts account will be:

• A)$8,300.
• B)$5,400.
• C)$2,900.
• D)$5,600.

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Definitions:

Variable Costs

Costs that change in proportion to the level of output or activity in the production process.

Fixed Costs

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance.

Peak-period Orders

Orders that occur at the highest volume times, often during seasonal or specific heavy demand periods.

Logistics Department

A division within a company that manages the movement of goods from the manufacturer to the end-user, covering transportation, warehousing, and inventory.