Gideon Company Uses the Allowance Method of Accounting for Uncollectible

question 30

Multiple Choice

Gideon Company uses the allowance method of accounting for uncollectible accounts.On May 3,the Gideon Company wrote off the $2,000 uncollectible account of its customer,A.Hopkins.The entry or entries Gideon makes to record the write off of the account on May 3 is:

• A) \(\begin{array}{|l|r|r|}
• \hline \text { Accounts Receivable-A Hopkins } & 2,000 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 2,000 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|l|r|r|}
• \hline \text { Allowance for Doubtful Accounts } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|l|r|r|}
• \hline \text { Accounts Receivable-A Hopkins } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable-A Hopkins } & & 2,000 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{|l|r|r|}
• \hline \text { Allowance for Doubtful Accounts } & 2,000 & \\
• \hline \text { Accounts Receivable-A Hopkins } & & 2,000 \\
• \hline
• \end{array}\)
• E) \(\begin{array}{|l|r|r|}
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable-A Hopkins } & & 2,000 \\
• \hline
• \end{array}\)

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Definitions:

Cash Receipts

The total amount of money received by a company during a specific period, including all sources of income.

Direct Labor-Hours

The aggregate amount of time spent by staff members directly participating in the creation process.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to each unit of production, based on an activity driver.

Fixed Manufacturing Overhead

Costs in the manufacturing process that remain constant regardless of the production volume, including equipment depreciation and building lease expenses.