When a Firm Uses The Allowance Method to Provide for Losses

question 2

Multiple Choice

When a firm uses the allowance method to provide for losses for uncollectible accounts, the collection of an account previously written off as uncollectible requires an entry to

• A)decrease the balance of the Allowance for Doubtful Accounts.
• B)reduce the balance of Uncollectible Accounts Expense.
• C)increase the balance of the Sales account.
• D)reinstate the account receivable.

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Definitions:

FOB Shipping Point

A shipping term indicating that the buyer assumes ownership and responsibility for goods at the moment they are shipped, with transportation costs borne by the buyer.

Net Income

The total earnings or profit of a company after all expenses have been deducted from revenues.

Physical Inventory

The process of counting and verifying the physical existence of tangible goods and assets held by a business for resale or production purposes.

Dollar-value LIFO Retail Method

This method combines the Last In, First Out (LIFO) inventory method with dollar-value calculations to adjust inventory for changes in price levels, often used in retail.