The Allowance for Doubtful Debts Account Had a Balance of $2200

question 8

Multiple Choice

The allowance for doubtful debts account had a balance of $2200 before bad debts of $1400 were written off and the allowance was adjusted to 10% of the accounts receivable balance of $20 000. The new amount of allowance for doubtful debts that is deducted from accounts receivable in the balance sheet is:

• A) $1400.
• B) $2000.
• C) $1200.
• D) $2200.

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Definitions:

Financial Instruments

Contracts that give rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

Convertible Note

A financial instrument that can be converted into a specified number of shares of the issuing company at certain times during its life, usually at the discretion of the holder.

Derivative Instruments

Financial contracts whose value is derived from the value of an underlying asset, index, or interest rate.

Primary Instruments

The basic securities in the financial market, such as stocks and bonds, that are traded directly between entities.