At January 1, Davidson Services Has the Following Balances

question 123

Multiple Choice

At January 1, Davidson Services has the following balances: During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.
Davidson records Uncollectible Account Expense at the end of the year using the percent-of-sales method, and applies a rate of 1.1%, based on past history.
After the year-end entry to adjust the Uncollectible accounts expense, what is the ending balance in the Uncollectible accounts expense?

• A)Debit of $1,400
• B)Credit of $1,944
• C)Debit of $1,144
• D)Credit of $544

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Definitions:

Critical Value

A critical value is a point on the scale of the test statistic beyond which we reject the null hypothesis, used in significance testing.

Null Hypothesis

A statement used in statistics that suggests there is no effect or no difference, and any observed variance is due to chance.

Alpha

In statistics, alpha represents the significance level, the probability of rejecting the null hypothesis when it is actually true, often set at 0.05.

Alternative Hypothesis

The hypothesis that is tested against the null hypothesis in statistical hypothesis testing, representing a statement that indicates some effect or difference.