At Year End Dodgy Ltd Had a Balance in Accounts

question 17

Multiple Choice

At year end Dodgy Ltd had a balance in Accounts receivable of $40 000 and an Allowance for doubtful debts of $2 000. It was decided to write off as irrecoverable the debt of Houdini Ltd totalling $3 500. It was further decided that the Allowance for doubtful debts should stand at 10 per cent of Accounts receivable. What was the journal entry needed to write off the debt of Houdini Ltd as irrecoverable?

• A) DR Allowance for doubtful debts $3 500
• CR Accounts receivable $3 500
• B) DR Bad debts expense $3 500
• CR Allowance for doubtful debts $3 500
• C) DR Bad debts expense $3 500
• CR Accounts receivable $3 500
• D) None of the above

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Definitions:

Upward Sloping

A term describing a line on a graph that moves higher as you move from left to right, used in various economic contexts.

Long-Run Supply Curve

A graphical representation showing the relationship between market prices and the amount of output produced over time, considering all inputs as variable.

Resource Prices

The costs associated with acquiring inputs used in the production process, including raw materials, labor, and capital.

Industry Output Expands

An increase in the total production of goods and services by companies within a particular sector of the economy.