At the Close of Its First Year of Operations, December

question 48

Multiple Choice

At the close of its first year of operations, December 31, 2007, Linn Company had accounts receivable of $540,000, after deducting the related allowance for doubtful accounts.During 2007, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible, accounts receivable of $40,000.What should the company report on its balance sheet at December 31, 2007, as accounts receivable before the allowance for doubtful accounts?

• A)$670,000
• B)$590,000
• C)$490,000
• D)$440,000

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Definitions:

Partial Equity Method

An accounting approach where an investor recognizes income from its investment in an associate to the extent of dividends received, differing from the full equity method which recognizes income as it's earned by the associate, regardless of dividends received.

Fair Value

The exchange value of an asset or the settlement cost of a liability in a well-arranged transaction with participants in the market on the measurement occasion.

Book Value

The net value of a company's assets minus its liabilities, often used as a measure of the company's worth.

Equipment

Tangible property used in the operation of a business that is not intended for sale, including machinery, tools, and vehicles.