In 2014 the Golic Co

question 140

Multiple Choice

In 2014 the Golic Co. had net credit sales of $600,000. On January 1, 2014, the Allowance for Doubtful Accounts had a credit balance of $15,000. During 2014, $24,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis) . If the accounts receivable balance at December 31 was $160,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014?

• A) $16,000.
• B) $25,000.
• C) $31,000.
• D) $24,000.

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Definitions:

Framing Effects

The influence on decision-making and judgments caused by the way information is presented, rather than just the information itself.

Utility

The total satisfaction or benefit derived by consuming a product or service, used to analyze choices made by consumers to maximize satisfaction.

Planning Fallacy

is the tendency to underestimate the time, costs, and risks of future actions while overestimating the benefits, leading to time and budget overruns.

Underestimate

To judge something below its actual value, size, or importance.