The Balance of Allowance for Doubtful Accounts Prior to Making

question 150

Multiple Choice

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense

• A)is relevant when using the percentage-of-receivables basis.
• B)is relevant when using the direct write-off method.
• C)is relevant to both the percentage-of-receivables basis and the direct write-off method.
• D)will never show a debit balance at this stage in the accounting cycle.

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Definitions:

Creditor

An individual or organization that lends money or extends credit to another party, expecting repayment in the future.

Prejudgment Remedy

A legal mechanism that allows a plaintiff to secure assets or interests of the defendant before the final judgment in a lawsuit, to ensure satisfaction of any potential award.

Lawsuit

A legal action or proceeding involving a dispute between two or more parties that is resolved in a court of law.

Super-Priority Liens

Liens that are given the highest priority over other types of liens, often arising by statute and placed on property which can bypass previously established liens.