The Following Information Was Taken from the Unadjusted Trial Balance

question 55

Multiple Choice

The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2017. All sales are on account.
Accounts and related balances at December 31, 2017 before adjustment:
$\begin{array}{lrr}& \text { Debit } & \text { Credit } \\\text { Accounts receivable } & \$ 46,000 & \\\text { Allowance for doubtful accounts } & & \$680\\\text { Sales (all on account) } & & 500,000 \\\text { Sales returns } & 3.000 &\end{array}$

Aging Schedule of Accounts Receivable:
$$\begin{array} { | l | c | c | } \hline \text { Age } & \text { Amount } & \% \text { Uncollectible } \\\hline \text { 0-30 days } & \$ 14,000 & 5 \% \\\text { 30-60 days } & 20,000 & 8 \% \\\text { Over 60 days } & 12,000 & 12 \%\end{array}$$
If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the bad debt expense for the year ending December 31, 2017?

• A)$4,280
• B)$3,600
• C)$3,680
• D)$3,060

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Definitions:

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the production of goods.

Direct Materials Costs

Costs that are directly traceable to the production of specific goods or services, such as raw materials used.

Direct Labor Costs

Expenses related to employees who directly contribute to the production of goods or services, such as wages for assembly line workers.

Period Costs

Costs that are expensed in the period they are incurred rather than being capitalized or included in the cost of goods sold, such as selling, general, and administrative expenses.