The Balance of Allowance for Doubtful Accounts Prior to Making

question 211

Multiple Choice

The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts

• A) is relevant when using the percentage of receivables basis.
• B) is relevant when using the percentage of sales basis.
• C) is relevant to both bases of adjusting for uncollectible accounts.
• D) will never show a debit balance at this stage in the accounting cycle.

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Definitions:

Poisson Approximation

A mathematical method for estimating the likelihood of a certain number of occurrences taking place within a set time period.

Uniform Density

A type of distribution in which all outcomes are equally likely within a specified range, characterized by a constant probability density function.

Probability

A measure of the likelihood that a particular event will occur, expressed as a number between 0 and 1.

Poisson Approximation

A statistical method used to approximate the probabilities of rare events in a fixed interval of time or space, assuming events occur with a known constant rate independently of the time since the last event.