An Adjusting Entry for Bad Debts Will Generally

question 19

Multiple Choice

An adjusting entry for bad debts will generally

• A) increase an expense account and decrease an asset account.
• B) increase an expense account and increase an asset account.
• C) increase an expense account and increase a contra-asset account.
• D) increase an expense account and increase a liability account.

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Definitions:

Stock Investment

The purchase of shares in a company with the expectation of earning a return through dividends, share price growth, or both.

Available-for-Sale Debt Securities

Debt investments not classified as held-to-maturity or trading securities, recorded at fair value on the balance sheet with unrealized gains or losses reported in other comprehensive income.

Fair Value

An estimate of the market price of an asset or liability, reflecting the value for which it could be bought or sold in a current transaction between willing parties.

Fair Value Adjustment

A financial accounting process of adjusting the book value of an asset or liability to reflect its current market value.