Use the Following Scenario to Answer the Following Questions: Dairy

question 11

Multiple Choice

Use the following scenario to answer the following questions: Dairy Wishes,a local ice cream store,finds that it sells out of ice cream sandwiches at the current price of $1.It raises the price to increase its revenues and finds that no one buys ice cream sandwiches anymore.
-The owners raised the price because they believed that the demand for ice cream sandwiches is

• A) inelastic.
• B) elastic.
• C) relatively price sensitive.
• D) perfectly elastic.
• E) unitary elastic.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents receivables that are expected to become uncollectable, used to estimate bad debts.

Bad Debts Expense

An expense account reflecting the cost of receivables that a company is unable to collect, considered a cost of doing business.

Accounts Receivable

Represents money owed to a business by its customers for goods or services delivered or used but not yet paid for.

Bad Debts Recovered

The unexpected receipt of payment on accounts previously written off as bad debts, leading to an income entry in the financial statements.