When a Debtor Makes a Payment to a Creditor Specifying

question 6

Multiple Choice

When a debtor makes a payment to a creditor specifying how it should be applied, the creditor must apply the payment:

• A) as directed by the debtor.
• B) to the oldest outstanding debt.
• C) to the most recent outstanding debt.
• D) to the largest outstanding debt.

---

Definitions:

Last-In, First-Out

An inventory valuation method where the costs of the most recently produced or purchased items are the first to be expensed.

Receiving Report

A document used to record the receipt of goods from a supplier, noting quantities and condition of the items received.

Retail Inventory Method

The retail inventory method is an accounting practice that estimates the ending inventory balance of a retailer by using the cost to retail price ratio.

Physical Count

The process of manually counting inventory items to verify quantities and ensure the accuracy of records.