The Allowance for Doubtful Accounts Has a Current Debit Balance

question 89

Multiple Choice

The allowance for doubtful accounts has a current debit balance of $2,550. Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were $250,000, which of the following would be part of the adjusting entry for bad-debt expense?

• A)Debit allowance for doubtful accounts for $7,500.
• B)Credit allowance for doubtful accounts for $4,950.
• C)Debit bad-debt expense for $7,500.
• D)Debit bad-debt expense for $10,050.

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Definitions:

Firms

Business organizations or entities engaged in commercial, industrial, or professional activities, aiming to generate profits.

Marginal Cost

The increase in total production costs that arises from producing an additional unit of a good or service.

Ideal

A concept or standard of perfection or excellence that serves as a benchmark or goal.

Price Takers

Entities in a market that accept prevailing prices for goods or services, lacking the market power to influence prices on their own.