Cambridge Co

question 21

Multiple Choice

Cambridge Co.uses the allowance method.During January 2019,Cambridge writes off a $640 customer account balance when it becomes clear that the customer will never pay.The entry to record the write-off will:

• A)decrease total assets by $640.
• B)decrease net income in 2019 by $640.
• C)decrease net accounts receivable by $640.
• D)not affect expenses in 2019.

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Definitions:

Crowding-Out Effect

The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending.

Government Spending

The total amount of money that a government expends on public services, social welfare programs, infrastructure, and defense, among other areas.

Interest Rates

A charge, expressed in terms of a percentage of the principal, applied by a lender to a borrower for using its resources.

Crowding-Out Effect

A situation where increased government spending leads to a reduction in private sector spending, often due to higher borrowing costs.