Which of the Following Methods of Determining Bad Debt Expense

question 156

Multiple Choice

Which of the following methods of determining bad debt expense does not properly match expense and revenue?

• A) Charging bad debts with a percentage of sales under the allowance method.
• B) Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method.
• C) Charging bad debts with an amount derived from aging accounts receivable under the allowance method.
• D) Charging bad debts as accounts are written off as uncollectible.

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Definitions:

Borrowing Rate

The interest rate that a financial institution charges a borrower for the use of money.

Principal

The original sum of money borrowed in a loan, or the amount of the loan that has yet to be repaid, excluding interest.

Annual Payments

Regular payments made yearly, often referring to the interest or dividends paid by bonds or stocks.

Compounded Annually

This term refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods, with the compounding occurring once per year.