A Company Ages Its Accounts Receivables to Determine Its End

question 47

Multiple Choice

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $39,375 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $3,285. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A) \(\begin{array}{|l|r|l|}
• \hline \text { Bad Debt Expense } & 36,090 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 36,090 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|l|r|r|}
• \hline \text { Bad Debt Expense } & 42,660 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 42,660 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|l|r|r|}
• \hline \text { Bad Debt Expense } & 39,375 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 39,375 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{|l|r|r|}
• \hline \text { Accounts Receivable } & 39,375 & \\
• \hline \text { Bad Debt Expense } & 3,285 & \\
• \hline \text { Sales } & & 42,660 \\
• \hline
• \end{array}\)
• E) \(\begin{array}{|l|r|l|}
• \hline \text { Accounts Receivable } & 36,090 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 36,090 \\
• \hline
• \end{array}\)

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Definitions:

Financial Data

Refers to information related to the financial performance of an entity, including income, expenses, assets, and liabilities.

Sales On Account

Transactions where goods or services are sold and payment is deferred to a future date, essentially selling on credit.

Cost Of Goods Sold

The costs directly connected with generating the goods a firm sells to its customers.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell products, and collect cash from customers.