A Common Way to Evaluate the Adequacy of the Bad

question 97

Multiple Choice

A common way to evaluate the adequacy of the bad debt allowance is to

• A)review the results of tests of controls that are concerned with the client's credit policy.
• B)inspect carefully the noncurrent accounts on the aged trial balance to determine which ones have not been paid subsequent to the balance sheet date.
• C)examine the program logic that is used to prepare the aged trial balance and to monitor the implementation of credit policies.
• D)send positive confirmations to all accounts with balances over 90 days based on the aged trial balance.

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Definitions:

Annual Maintenance

Routine or regular maintenance carried out on equipment or facilities to ensure their efficient operation and to prevent breakdown or failure.

Intercompany Bond Holdings

Intercompany Bond Holdings pertain to bonds owned by one entity within a larger corporate group that were issued by another entity within the same group.

Allocating Gain

The process of distributing profit among different accounts or investments.

Substance Over Form

An accounting principle that emphasizes the economic reality of transactions rather than their legal form to present a more accurate picture of a company's financial position.