Dillon Company Uses the Allowance Method to Account for Bad

question 40

Multiple Choice

Dillon Company uses the allowance method to account for bad debts.The entry to write-off a bad account (one that will never be collected) should be: $\begin{array}{l l c}& \text { Debit } & \text { Credit }\\\text {A. } &\text { Bad debt expense} &\text { Accounts receivable }\\\text { B. } & \text { Bad debt expense }&\text { Allowance for doubtful accounts }\\\text { C. } & \text { Sales revenue }&\text { Accounts receivable}\\\text { D. } & \text {Allowance for doubtful accounts }&\text { Accounts receivable }\\\end{array}$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

---

Definitions:

Value At Risk

Value at Risk (VaR) is a statistical measure used to assess the risk of loss on a specific portfolio of financial assets, indicating the maximum potential loss over a given time frame at a certain confidence level.

Negatively Skewed

Refers to a distribution that is asymmetrical and has a longer tail on the left side of the peak, indicating more values fall below the mean.

Standard Deviation

A statistical measure representing the dispersion or variability of a set of data points from their mean, often used in finance to gauge the volatility of an investment.

Effective Annual Rate

The interest rate on an investment or loan, annualized and taking into account the effects of compounding within the year.