What Happens to the Cost of Growing Crops on a Particular

question 29

Multiple Choice

What happens to the cost of growing crops on a particular farm when the land is rezoned from agricultural to industrial use and its price triples?

• A)The cost rises, but only if the farmer rents the land from someone else.
• B)There is no change unless industrialization somehow interferes with farming.
• C)The cost will probably fall, because industrialization is often incompatible with farming.
• D)The cost rises, even if the farmer owns the land.

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Definitions:

Bad Debts Expense

An expense account that represents accounts receivable that a company does not expect to collect.

Unadjusted Trial Balance

A listing of all the accounts and their balances from the ledger, before any adjustments, used to check the arithmetic accuracy of bookkeeping.

Aging of Receivable Method

An accounting technique used to estimate uncollectible debts by analyzing the age of accounts receivable.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may ultimately not be collectible.