Your Company Uses the Aging of Accounts Receivable Method

question 192

Multiple Choice

Your company uses the aging of accounts receivable method.Net credit sales are unchanged from last year,the year-end balance in Accounts Receivable is unchanged from the previous year's ending balance,and there were no write-offs during the current year.The company previously averaged about 20% of its total accounts receivable in the "over 90 days past due" category and now has 35% in this category at the end of the current year.The dollar amount of the adjustment to record Bad Debt Expense in the current year:

• A)declines,thus increasing the ending balance of the Allowance for Doubtful Accounts account.
• B)increases,thus increasing the ending balance of the Allowance for Doubtful Accounts account.
• C)declines,thus reducing the ending balance of the Allowance for Doubtful Accounts account.
• D)increases,thus reducing the ending balance of the Allowance for Doubtful Accounts account.

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Definitions:

Intended To Be Bound

A principle indicating that parties involved in an agreement wish and intend to be legally obligated under that agreement.

Void

Lacking legal validity or effect; something that is null and cannot produce any legal consequences.

Unenforceable

A term that describes a contract or clause that, due to certain legal deficiencies, cannot be upheld or enforced by a court.

Commercial Relationships

Professional interactions and dealings between businesses or between businesses and customers that involve the exchange of goods, services, or information.