Bartosiewicz Clinic Uses Client-Visits as Its Measure of Activity

question 142

Multiple Choice

Bartosiewicz Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 3,500 client-visits, but its actual level of activity was 3,490 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting:
Actual results for January:
The net operating income in the planning budget for January would be closest to:

• A) $13,312
• B) $13,500
• C) $6,400
• D) $6,364

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Definitions:

Allowance for Doubtful Accounts

An account that offsets assets, specifically designed to anticipate the part of accounts receivable that might be uncollectible.

Aging Method

A technique used in accounting to estimate uncollectible accounts receivable by categorizing them based on the length of time they have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account used to reduce the total receivables reported to reflect only the amounts expected to be collected.

Bad Debts Expense

Bad debts expense represents the loss that a company anticipates or realizes from customers who are unable to pay their outstanding balances.