If the Allowance for Doubtful Accounts Has a $1,000 Debit

question 193

Multiple Choice

If the Allowance for Doubtful Accounts has a $1,000 debit balance prior to making the end-of-period adjusting entry for bad debts using the aging of accounts receivable method,then it must mean that the:

• A)debit to Bad Debt Expense will be $1,000 more than the desired ending balance in the Allowance for Doubtful Accounts.
• B)debit to Bad Debt Expense will be $1,000 less than if the Allowance balance had been $0.
• C)direct write-off method was used.
• D)percentage of sales method was used.

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Definitions:

Average Daily Receipts

The average amount of cash received by a business on a daily basis, calculated over a specific period of time.

Collection Delay

The lag between the time when a payment is made by a customer and when the funds are actually available for use by the recipient.

Average Daily Float

The average amount of time it takes for checks or other transactions to clear and be reflected in the available balance of an account.

Collection Delay

The period between when a sale is made and when the payment is actually received.