The Following Information Is from the 2016 Records of Armand

question 90

Multiple Choice

The following information is from the 2016 records of Armand Camera Shop: $\begin{array}{|l|l|}\hline \text { Accounts receivable, 31 December } 2016 &\$ 44,000 \text { (debit) } \\\hline\begin{array}{l}\text { Allowance for doubtful debts, 31 December } 2016\end{array} &\\\text { prior to adjustment } & 1400 \text { (debit) } \\\hline \text { Net credit sales for } 2016 & 177,000 \\\hline \text { Accounts written off as uncollectable during 2016 } & 14,000 \\\hline \text { Cash sales during } 2016 & 26,000\\\hline\end{array}$ Bad debts expense is estimated by the percentage of sales method.Management estimates that 5% of net credit sales will be uncollectable.The balance of the Allowance for doubtful debts after adjustment will be:

• A)$8750
• B)$10,250
• C)$11,550
• D)$7450

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Definitions:

Consumer Goods

Items produced for personal or household use, typically characterized by their direct consumption and satisfaction of individual needs.

Security Interest

A legal claim or lien on collateral, ensuring that a debt or obligation is secured with specific property.

Creditor

An individual or institution that lends money or extends credit to another entity, which is obliged to pay back the loan.

Pledge

The transfer of collateral to a secured party.