A Company Has $90,000 in Outstanding Accounts Receivable and It

question 49

Multiple Choice

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts.Experience suggests that 4% of outstanding receivables are uncollectible.The current balance (before adjustments) in the allowance for doubtful accounts is an $800 debit.The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

• A)$3,600
• B)$3,568
• C)$3,632
• D)$2,800
• E)$4,400

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Definitions:

Direct Lease

A lease agreement directly between the lessor and lessee, excluding intermediaries, typically for commercial properties or automobiles.

Manufacturer

A company or individual that produces finished goods from raw materials through the use of tools, human labor, machinery, and chemical processing.

Lease Agreements

Contracts between a lessor and a lessee that grant the lessee the right to use an asset for a specific period in exchange for payment.

Lower Taxes

Reductions in the amount of tax imposed by a governmental authority.