Allowance for Doubtful Accounts Has a Debit Balance of $980

question 70

Multiple Choice

Allowance for doubtful accounts has a debit balance of $980 at the end of the current year (prior to adjustment) . Net credit sales for the current period amount to $900,000 and 2.5% is estimated to be uncollectible. The adjusting entry would require a credit to:

• A)bad-debt expense for $23,480.
• B)allowance for doubtful accounts for $21,520.
• C)allowance for doubtful accounts for $22,500.
• D)accounts receivable accounts for $22,500.

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Definitions:

Net Operating Income

A company's revenue minus its operating expenses, excluding tax and interest, representing the profit from core business operations.

Sales Increase

A rise in the amount of products or services sold by a business within a specific period, indicating growth or an uptick in market demand.

Degree of Operating Leverage

A financial ratio that measures how sensitive a company's operating income is to changes in revenue, indicating risk level.

Variable Expenses

Costs that vary in total in direct proportion to changes in an activity level or volume, such as materials and labor costs.