As of December 31,Frappa Company Has a Balance of $5,000

question 129

Multiple Choice

As of December 31,Frappa Company has a balance of $5,000 in accounts receivable.Of this amount $500 is past due and the remainder is not yet due.Frappa has a credit balance of $45 in the allowance for doubtful accounts.Frappa Company estimates its bad debt losses using the aging of receivables method,with estimated bad debt loss rates equal to 1% of accounts not yet due and 10% of past due accounts.How would the required adjusting journal entry be recorded in the Allowance for Doubtful Accounts?

• A)$95 (credit).
• B)$55 (credit).
• C)$50 (credit).
• D)$45 (debit).

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Definitions:

Cash Flow

A measure of the net amount of cash and cash-equivalents being transferred into and out of a business.

Merger

The process by which two or more companies combine their operations, typically to achieve synergies, expand their market reach, or enhance competitiveness.

Stockholders

Individuals or entities that own a share or shares of stock in a corporation, granting them certain rights and a stake in the company's performance.