A Surety's Right to Recover His/her Costs from the Principal

question 17

Multiple Choice

A surety's right to recover his/her costs from the principal once he/she performs or pays the principal's obligations is known as ___.

• A)the right to fair compensation
• B)the right of subrogation
• C)the right to reimbursement
• D)the right to contribution

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Definitions:

Aging of Receivable Method

An accounting technique used to estimate bad debts by analyzing accounts receivable based on the length of time they have been outstanding.

Allowance for Doubtful Accounts

A contra-asset account that represents the amount of receivables a company does not expect to actually collect.

Bad Debts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect due to customer defaults.

Allowance Method

An accounting technique used to account for bad debts by estimating and recording uncollectible accounts receivable.