Open Range Foods Writes Off a Bad Debt of $400

question 61

Multiple Choice

Open Range Foods writes off a bad debt of $400 on a specific customer account. The journal entry for this transaction under the direct write off method would include:

• A) a credit to Allowance for Doubtful Accounts.
• B) a credit to Bad Debts Expense.
• C) a debit to Bad Debts Expense.
• D) a debit to Allowance for Doubtful Accounts.

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Definitions:

Current Ratio

An assessment tool that determines an enterprise's capability to settle short-term due debts by dividing its immediate assets by its immediate liabilities.

Balance Sheet

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, offering a snapshot of its financial position.

Sales On Account

Transactions where goods or services are sold and payment is deferred to a future date, effectively allowing the buyer to purchase on credit.

Cost Of Goods Sold

The total cost directly associated with producing goods sold by a business, including materials, labor, and manufacturing overhead.