The Following Selected Amounts Are Reported on the Year-End Unadjusted

question 148

Multiple Choice

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit.Based on past experience,the company estimates 1% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
• B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
• D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

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Definitions:

Economic Inefficiency

arises when resources are not allocated in a way that maximizes the potential output or when there is a failure to fully utilize resources, resulting in lost potential gains.

Limit Pricing

A competitive strategy where a firm sets the price of its product low enough to discourage new entrants from entering the market.

Technological Advance

The process of developing and implementing new technologies to improve products, services, or processes, driving economic growth and efficiency.

First-Mover Advantage

The competitive advantage gained by the initial significant occupant of a market segment, allowing for the establishment of strong brand recognition and customer loyalty before rivals enter the market.