The Beginning Credit Balance in the Allowance for Doubtful Accounts

question 48

Multiple Choice

The beginning credit balance in the allowance for doubtful accounts is $12,656 and the ending credit balance is $14,348. If bad debt expense was $3,879, which of the following statements is true?

• A) The allowance account was retroactively debited $2,187 for additional bad debts that became apparent in a future time period.
• B) The allowance account was debited $2,187 for write-offs of actual bad debts.
• C) The allowance account was credited $2,187 for recoveries of bad debts.
• D) The allowance account was credited $2,187 for the difference between the percent of credit sales method and the aging of accounts receivable method.

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Definitions:

Useful Life

The estimated period over which a fixed asset is expected to be usable by the business, impacting depreciation calculations.

Salvage Value

An estimation of what an asset will be worth at the end of its usable life.

Payback Period

This is the length of time required to recover the initial investment cost of a project, calculated by dividing the investment amount by the annual cash inflows.

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment by discounting them to their present value.