Management Uses the Percentage-Of-Sales Approach Method to Calculate the Allowance

question 5

Multiple Choice

Management uses the percentage-of-sales approach method to calculate the allowance for doubtful debts.Management calculated the allowance for doubtful debts on the basis of 2% of sales.However,by year-end it was aware that the rate should have really been 3% of sales.Management does not adjust the allowance for doubtful debts at year-end.As a result:

• A) assets are overstated and net profit is overstated
• B) assets are overstated and net profit is understated
• C) assets are understated and net profit is overstated
• D) assets are understated and net profit is understated.

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Definitions:

Industrial/Organizational Psychologists

Professionals who apply psychological principles and research methods to workplace issues to improve employee performance and well-being.

Workplace

The physical or virtual location where an individual performs their job duties.

Work Motivation

The set of internal and external forces that influence an individual's level of effort and persistence in the face of obstacles at work.

Feminist Psychology

A branch of psychology that analyzes psychological structures and practices from the perspectives of gender, focusing on the social structures and gender norms that influence mental health and behavior.