Upon Completing an Aging Analysis of Trade Receivables, the Accountant

question 14

Multiple Choice

Upon completing an aging analysis of trade receivables, the accountant for Rosco Works estimated that $5,000 of the current $98,000 of trade receivables would be uncollectible. The allowance for doubtful accounts had a $400 credit balance at year-end prior to adjustment. What amount of bad debt expense should appear in Rosco's income statement for the year?

• A) $5,000.
• B) $5,400.
• C) $4,600.
• D) $0

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Definitions:

General Knowledge

General knowledge entails a broad range of facts, information, and understanding across various subjects and areas, typically accumulated over time through education and experience.

Anchoring Phenomenon

A concept in psychology where initial exposure to a number or value serves as a reference point and influences subsequent judgments.

Subsequent Estimates

Revisions or new calculations made after initial estimates, often based on additional data or changes in a project or situation.

Sunk Cost Effect

A bias in decision making in which already “spent” costs unduly influence decisions on whether to continue.