A Company Has an Ending Accounts Receivable Balance of $900,000

question 114

Multiple Choice

A company has an ending accounts receivable balance of $900,000 and it estimates that uncollectible accounts will be 2% of the receivable balance. If Allowance for Doubtful Accounts has a credit balance of $2,000 prior to adjustment, its balance after adjustment will be a credit of

• A) $20,000.
• B) $18,000.
• C) $17,960.
• D) $16,000.

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Definitions:

Direct Material Used

Direct material used involves the consumption of raw materials that are transformed into and directly identifiable with the finished product in the manufacturing process.

Variable Manuf. Overhead

Variable manufacturing overhead refers to the indirect costs that change with the level of production, such as utilities for the manufacturing plant.

Labour Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain number of units, valued at the standard labor rate.

Direct Labour Cost

The wages and salaries paid to workers who are directly involved in the production of goods or services.