Under the Allowance Method for Uncollectible Accounts, When a Year-End

question 160

Multiple Choice

Under the allowance method for uncollectible accounts, when a year-end adjustment is made for estimated uncollectible accounts,

• A) liabilities decrease.
• B) net earnings is unchanged.
• C) total assets decrease.
• D) total assets are unchanged.

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Definitions:

Price Increase

An adjustment in the cost of goods or services, typically resulting in consumers paying more for those items.

Contribution Margin Ratio

A financial metric that measures how much of a company's revenue is left over after variable costs are subtracted, expressed as a percentage of sales revenue.

Variable Expense Ratio

A ratio computed by dividing variable expenses by sales.

Operating Leverage

A financial concept that measures the proportion of fixed costs in a company's cost structure, indicating its sensitivity to changes in sales volume.