Your Company Has Averaged About 26% of Its Accounts Receivable

question 45

Multiple Choice

Your company has averaged about 26% of its accounts receivable in the "over 90 days past due" category and now forecasts 18% in this category.You use the aging of accounts receivable method of estimating bad debt expense.If the total of credit sales remains unchanged from previous months and no write offs are made,the estimate of bad expense based on the new forecast will:

• A)increase over the estimate for previous months.
• B)decrease over the estimate for previous months.
• C)not change.
• D)will depend on the percentage of credit sales deemed un-collectible.

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Definitions:

Population Parameters

Characteristics that summarize or describe aspects of a population, such as mean, variance, or median.

N - 1 Adjustment

A statistical method used to correct the bias in the variance estimate of a sample.

Standard Deviation

A measure that quantifies the amount of variation or dispersion of a set of data values.

Scores

Quantitative values assigned to individuals or items for the purpose of evaluation or measurement.