When a Company That Uses the Allowance Method Writes Off

question 63

Multiple Choice

When a company that uses the allowance method writes off an actual bad debt:

• A)total assets decrease.
• B)total liabilities increase.
• C)total expenses increase and total revenues increase.
• D)total assets,revenue,and expenses remain the same.

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Definitions:

Standard Price

The predetermined cost of a single unit of product or service, used in budgeting and to measure efficiency.

Direct Labor Rate Variance

The difference between the expected cost of direct labor and the actual cost incurred, based on the rate paid per hour.

Direct Labor Time Variance

The difference between the actual time spent on production and the estimated standard time, multiplied by the standard labor rate.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the expected (or budgeted) cost, based on standard rates and actual hours worked.