Under the Allowance Method, the Entry to Reinstate an Account

question 13

Multiple Choice

Under the allowance method, the entry to reinstate an account previously written off:

• A)increases total assets.
• B)increases net income and increases total assets.
• C)decreases net income and increases total assets.
• D)has no effect on net income or total assets.

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Definitions:

Required Rate of Return

The required rate of return is the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Put Option

A financial contract giving the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Striking Price

The predetermined price at which the holder of an option can buy or sell the underlying security.

Cumulative Feature

A characteristic of certain preferred stocks or securities where unpaid dividends accumulate and must be paid before dividends to common stockholders.