Which of the Following Items Should Alert the Analyst to the Potential

question 7

Multiple Choice

Which of the following items should alert the analyst to the potential for manipulation when analyzing accounts receivable and the allowance for doubtful accounts?

• A)Sales, accounts receivable and the allowance for doubtful accounts are all growing at approximately the same rate.
• B)A company lowers its credit standards and also increases the balance in the allowance for doubtful accounts.
• C)Accounts receivable is growing at a large rate and the allowance for doubtful accounts is decreasing.
• D)An analysis of the "Valuation and Qualifying Accounts" schedule required in the Form 10-K reveals that the amounts recorded for bad debt expense are close in amount to the actual amounts written off each year.

---

Definitions:

B2B Transaction

A commercial transaction between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

B2C Transaction

A commercial exchange wherein businesses sell goods or services directly to consumers, typically through retail outlets or online platforms.

Commission

Compensation or financial incentive for salespeople based on a fixed percentage of their sales.

Institutional Buyer

Organizations, such as companies, governments, or schools, that purchase goods or services in large quantities, often for internal use or resale.