Gamer Incdetermines That It Cannot Collect $60 Owed to It by by Its

question 25

Multiple Choice

Gamer Inc.determines that it cannot collect $60 owed to it by its customer T.Jacobs.Gamer uses the direct write-off method.How would the company record this transaction?

• A)Debit Bad Debt Expense for $60 and credit Accounts Receivable-T.Jacobs for $60.
• B)Debit Allowance for Doubtful Accounts for $60 and credit Accounts Receivable-T.Jacobs for $60.
• C)Debit Bad Debt Expense for $60 and credit Allowance for Doubtful Accounts for $60.
• D)Debit Notes Receivable-T.Jacobs for $60 and credit Accounts Receivable-T.Jacobs for $60.
• E)Debit Accounts Receivable-T.Jacobs for $60 and credit Notes Receivable-T.Jacobs for $60.

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Definitions:

Contingent Liability

A potential financial obligation that may arise in the future depending on the outcome of a specific event.

Reasonably Possible

A term used in accounting and law to indicate that a future event or condition has a chance of occurring.

Liability

A company's financial debt or obligations that arise during the course of its business operations.

Probable Loss

An estimated loss from a contingent liability that is likely to occur and can be reasonably estimated.