"The Company Has Not Made an Allowance for Bad Debts

question 17

Multiple Choice

"The company has not made an allowance for bad debts for an account deemed uncollectible in the amount of $250,000 as of the year ended December 31, 2001..." is an example of a

• A)GAAP change requiring a qualified opinion.
• B)Scope limitation.
• C)Departure from GAAP.
• D)Report with a disclaimer of opinion.

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Definitions:

Cumulative Preferred Stockholder

A cumulative preferred stockholder is an investor who owns preferred shares that accumulate unpaid dividends, ensuring they are paid out before any dividends on common stock.

Dividends in Arrears

Dividends on preferred stock that have been declared but not yet paid to shareholders.

Nonparticipating

Typically refers to insurance policies or preferred stock where the holders do not have the right to share in certain dividends beyond the specified rate or in the surplus assets.

Dividends

Payments made by a corporation to its shareholder members. It is the share of profits and retained earnings that the company pays out to its shareholders.