A Company Has $90,000 in Outstanding Accounts Receivable and It

question 49

Multiple Choice

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments) in the allowance for doubtful accounts is an $800 debit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

• A)$3,600
• B)$3,568
• C)$3,632
• D)$2,800
• E)$4,400

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Definitions:

Time Warner

A major multinational media and entertainment conglomerate, known for producing film, television, and entertainment content.

Angel Capitalism

Investment in start-up companies by wealthy individuals, known as angel investors, who provide capital in exchange for equity or convertible debt.

Venture Capitalism

A form of private equity and financing that investors provide to startup companies and small businesses with long-term growth potential.

Factoring

A financial transaction where businesses sell their accounts receivable to a third party at a discount for immediate cash.