Using Its Aging of Accounts Receivable,Age Old,Inc

question 1

Multiple Choice

Using its aging of accounts receivable,Age Old,Inc.estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible.Prior to making its adjusting entry,the unadjusted Allowance for Doubtful Accounts has a credit balance of $1,000.After the adjustment,the:

• A)Allowance for Doubtful Accounts will have a $90,000 credit balance.
• B)Allowance for Doubtful Accounts will have an $89,000 credit balance.
• C)Allowance for Doubtful Accounts will have a $91,000 credit balance.
• D)Bad Debt Expense will equal $90,000.

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Definitions:

Offer

A proposal presented by one party to another as a basis for negotiation, intending to create a binding legal agreement upon acceptance.

Interim Agreement

A binding contract that will subsequently be put into a more formal document; usually referred to as an agreement of purchase and sale in a real estate transaction.

Binding Contract

A legal agreement between parties that is enforceable by law, where each party has specific obligations.

Agreement

A mutual understanding between two or more parties about their respective rights and duties regarding past or future performances.