Foothill Construction Uses the Allowance Method for Bad Debts

question 240

Multiple Choice

Foothill Construction uses the allowance method for bad debts.If management is overly pessimistic about its ability to collect customer accounts,the company will overstate Bad Debt Expense and:

• A)understate net income and days to collect will increase.
• B)understate net income but days to collect will decline.
• C)overstate net income and days to collect will increase.
• D)overstate net income and days to collect will decline.

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Definitions:

Materials Cost

The expense incurred for the raw materials that are used in the production of goods or services.

Yards Per Unit

A measurement used to indicate the amount of yardage (length in yards) of material required or utilized per unit of production.

Direct Labor Variances

The differences between the budgeted or standard costs of direct labor and the actual costs incurred, which can indicate efficiencies or inefficiencies in labor usage.

Help Desk Assistant

A role or automated system designed to provide users or employees with information and support related to a company's products or services.