Pineapple's Fruit Smoothies Began the Year with a $4,200 Credit

question 23

Multiple Choice

Pineapple's Fruit Smoothies began the year with a $4,200 credit balance in its Allowances for Doubtful Accounts. During the year, it accrued $21,500 of bad debt expense and wrote off accounts totaling $28,000. At year-end, a percentage of the outstanding accounts receivable indicated that a $4,800 allowance should be provided for on that date. The year-end adjustment for bad debt expense should be

• A) $7,100
• B) $4,800
• C) $3,000
• D) $2,300

Apply expense allocation principles to specific scenarios including rent, administrative, and indirect factory expenses.

Distinguish between direct and indirect expenses within the context of departmental income statements.

Understand the concept and process of capitalizing interest on construction loans.

Recognize the differences and applications of IFRS and U.S. GAAP regarding asset impairment and reversals.

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Definitions:

Gain on Sale

The profit earned from the sale of an asset or investment, calculated as the difference between the sale price and the original purchase price.

Operating Activities

The day-to-day actions that are involved in running a business and generating revenue, such as production, sales, and delivery of the company’s product and services.

Direct Method

A way of reporting cash flows from operating activities by listing major classes of gross cash receipts and payments.

Amortization of Bond Premium

The process of gradually writing off the premium paid over the par value of a bond over its life.