Allowance for Doubtful Accounts Has a Debit Balance of $2,300

question 122

Multiple Choice

Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment) . The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?

• A) debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
• B) debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
• C) debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
• D) debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600

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Definitions:

Variable Costs

Costs that fluctuate in direct proportion to the level of output or activity in a business.

Breakeven Point

The financial situation where total costs equal total revenues, resulting in neither profit nor loss.

Breakeven Point

The point at which total cost and total revenue are equal, meaning a business is neither making a profit nor a loss.

Average Variable Costs

The total variable costs of production divided by the quantity of output produced, reflecting costs that change with production levels.