"If Tom Had Twice as Much Money, He Could Consume

question 204

Multiple Choice

"If Tom had twice as much money, he could consume twice as much. If everyone had twice as much money, they could consume twice as much." This quote illustrates

• A) the difference between positive and normative economics.
• B) the fallacy of composition.
• C) that association is not causation.
• D) the law of unintended consequences.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that is expected to be uncollectible.

Percentage of Credit Sales Method

An accounting method used to estimate bad debt expense by applying a fixed percentage to the total credit sales of a period.

Credit Sales

Sales made by a business on credit, where payment is collected at a later date.

Bad Debt Expense

The estimated amount of receivables that a company does not expect to collect.