The Data Presented Below Is for Falconi, Inc ? What Is the Effect on Liquidity When Falconi Records

question 14

Multiple Choice

The data presented below is for Falconi, Inc.for 2016. $\begin{array}{lr}\text { Credit sales during the year } & \$ 2,100,000 \\\text { Accounts receivable-December 31, 2016 } & 395,000 \\\text { Allowance for doubtful accounts-December 31,2016 } & 20,000 \\\text { Bad debt expense for the year } & 17,000\end{array}$ ? What is the effect on liquidity when Falconi records its estimate for bad debt expense using the allowance method?

• A) Liquidity decreases
• B) Liquidity increases
• C) Liquidity stays the same
• D) Liquidity both increases and decreases

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Definitions:

First-In, First-Out Method

An inventory valuation method that assumes goods are sold in the order they are acquired, with the oldest inventory items sold first.

Materials

Raw substances or components used in the manufacturing or production process.

Assembly Department

A division within a manufacturing facility where components are assembled into finished products.

First-In, First-Out Method

An accounting method for valuing inventory that assumes the first items placed into inventory are the first sold.