When a Retailing Business Is Making Estimates​ for the Expected

question 36

Multiple Choice

When a retailing business is making estimates​ for the expected customer refunds and allowances, it decreases the customer refunds payable account:

• A) ​and the sales account.
• B) ​and the purchases account.
• C) ​and the accounts receivable account.
• D) ​and the operating expenses.

---

Definitions:

Opportunity Cost

The cost of what is forgone in order to pursue a certain action; the value of the best alternative option that is not selected.

Subjective Values

The notion that the value of goods and services is determined by the preferences and perceptions of individuals, rather than by intrinsic characteristics.

Decision Making

The process of selecting among available alternatives based on the preferences and values of the decision-maker.

Sunk Cost

A cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions.