A Customer of Exquisite Flooring Recently Filed for Bankruptcy Protection

question 117

Multiple Choice

A customer of Exquisite Flooring recently filed for bankruptcy protection two months ago, leading the credit manager of Exquisite Flooring to conclude that the company would never collect the balance of $2,800 owed by the customer to our company.
-Use the information above to answer the following question.Suppose that three months after filing bankruptcy,Exquisite Flooring's customer paid its outstanding account balance.Which of the following journal entries would be made to record this transaction?

• A) Debit Cash and credit Allowance for Doubtful Accounts for $ 2,800
• B) Debit Cash and credit Accounts Receivable for $2,800
• C) Debit Accounts Receivable and credit Allowance for Doubtful Accounts for $2,800; debit Cash and credit Accounts Receivable for $2,800
• D) Debit Cash and credit Sales for $2,800

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Definitions:

Classical Range

In economics, refers to the level of output where all resources are fully employed, and prices are flexible, historically associated with the Classical theory of economics.

Savings

Money that is set aside from disposable income or after personal expenses have been covered, often put into a deposit or an investment for future use.

Wealth Effect

The change in spending and consumption patterns caused by changes in perceived wealth.

Recessions

are described as periods of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in successive quarters.