Manley Operates a Law Practice on the Accrual Method and Calendar

question 47

Multiple Choice

Manley operates a law practice on the accrual method and calendar year. At the beginning of the year Manley's firm had an allowance for doubtful accounts with abalance of $15,000. At the end of the year, Manley recorded bad debt expense of $23,000 and the balance of doubtful accounts had increased to $18,000. What is Manley's deduction for bad debt expense this year?

• A) $5,000.
• B) $20,000.
• C) $26,000.
• D) $23,000.
• E) $3,000.

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Definitions:

Internal Growth Rate

The rate at which a company can grow its sales and earnings without needing to borrow money or secure additional equity financing.

Profit Margin

A financial metric that measures the amount of profit made on a sale as a percentage of revenue, illustrating efficiency.

Retention Ratio

The retention ratio is a financial metric that measures the proportion of a company's earnings that are not distributed as dividends to shareholders but are instead reinvested in the business.

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.