Table 9-5
the Ritchie Company Gathered the Following Information Pertaining

question 7

Multiple Choice

Table 9-5
The Ritchie Company gathered the following information pertaining to its year ended December 31, 2019, prior to any adjustments:
$$\begin{array} { | l | r | r | } \hline \text { Net credit sales for the year } & \$ 780,000 & \\\hline \text { Accounts receivable, Dec. } 31,2019 & 170,000 & \\\hline \text { Allowance for doubtful accounts, } & & \\\text { December } 31,2019 & 3,200 & \mathrm { Cr } . \\\hline & & \\\hline\end{array}$$ Aging of accounts receivable at December 31, 2019:
$$\begin{array} { | l | r | } \hline 1 - 30 \text { days } & \$ 95,000 \\\hline 31 - 60 \text { days } & 38,000 \\\hline 61 - 90 \text { days } & 23,000 \\\hline \text { Over } 90 \text { days } & 14,000 \\\hline \text { Total } & \$ 170,000 \\\hline\end{array}$$
-Referring to Table 9-5, assume Ritchie uses the percent-of-sales method for estimating uncollectible accounts. Ritchie estimates that uncollectible accounts will be 1.75% of net credit sales. The adjusting entry to record bad-debt expense for the year is:

• A) \(\begin{array} { | c | r | r | }
• \hline \text { Bad-Debt Expense } & 13,650 & \\
• \hline \text { Accounts Receivable } & & 13,650 \\
• \hline
• \end{array}\)
• B) \(\begin{array} { | c | r | r | }
• \hline \text { Bad-Debt Expense } & 10,450 & \\
• \hline \text { Accounts Receivable } & & 10,450 \\
• \hline
• \end{array}\)
• C) \(\begin{array} { | c | r | r | }
• \hline \text { Bad-Debt Expense } & 16,850 & \\
• \hline \text { Allow. for Doubtful Accts. } & & 16,850 \\
• \hline
• \end{array}\)
• D) \(\begin{array} { | c | r | r | }
• \hline \text { Bad-Debt Expense } & 13,650 & \\
• \hline \text { Allow. for Doubtful Accts. } & & 13,650 \\
• \hline
• \end{array}\)

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Definitions:

Property Taxes

Taxes levied by local governments based on the value of property owned, such as land and buildings.

Compound Annual Rate

The rate of return that would be required for an investment to grow from its beginning balance to its ending one, compounding over a period of a year.

Compounded Annually

Describes the calculation of interest on an investment whereby the interest earned each year is added to the principal sum, leading to interest being earned on interest from the subsequent year onwards.

Monthly Compounded

Calculation of interest on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan, compounded every month.