In 2021, Warehouse 13 Had Net Credit Sales of $750,000

question 117

Multiple Choice

In 2021, Warehouse 13 had net credit sales of $750,000.On January 1, 2021, Allowance for Doubtful Accounts had a credit balance of $16,000.During 2021, $29,000 of uncollectible accounts receivable were written off.Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivable basis) .If the accounts receivable balance at December 31 was $150,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2021?

• A)$150,000
• B)$29,000
• C)$28,000
• D)$31,000

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Definitions:

Effective Interest Rate

The real rate of interest earned or paid on a loan or investment, accounting for the effect of compounding over the period.

Compensating Balance

A minimum account balance that a borrower must maintain as a condition for borrowing from a lender or for obtaining favorable loan terms.

Stated Interest Rate

This refers to the nominal or advertised interest rate on a loan or financial product, not accounting for compounding or fees.

Trade Credit

A type of commercial financing where a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.