A Company Uses the Percent of Sales Method to Determine

question 90

Multiple Choice

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit.Based on past experience,the company estimates 0.6% of net 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 $2,130; credit Allowance for Doubtful Accounts $2,130.
• B)Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
• C)Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
• D)Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
• E)Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.

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Definitions:

Carbon Dioxide Emissions

Carbon dioxide emissions are the release of CO2 into the atmosphere, primarily from burning fossil fuels, which contribute to global warming and climate change.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, ensuring that resources are used for producing the goods and services most desired by society.

Willingness to Pay

The maximum amount an individual is ready to spend on a good or service, reflecting the value the consumer places on it.

Supply-Side Market Failures

Situations where the production or supply side of the market does not efficiently allocate resources due to externalities or other market imperfections.