In 2010, Garrison Company Had Net Credit Sales of $1,125,000

question 141

Multiple Choice

In 2010, Garrison Company had net credit sales of $1,125,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2010, $45,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis) . If the accounts receivable balance at December 31 was $300,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?

• A) $30,000
• B) $112,500
• C) $48,000
• D) $45,000

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Definitions:

Marginal Costs

The additional cost incurred from producing one more unit of a good or service.

Break Even

The point at which total costs and total revenue are equal, resulting in no net loss or gain for a business.

Selling Price

The amount of money for which a product or service is sold to customers.

Raw Materials

The basic materials from which products are made, typically unprocessed or minimally processed before being used in manufacturing processes.