Abbot Safe & Lock
the Following Information Was Obtained from the Company's

question 150

Multiple Choice

Abbot Safe & Lock
The following information was obtained from the company's records for Year 1:
$\begin{array}{lr}\text { Credit sales during the year } & \$ 3,200,000 \\\text { Accounts receivable-December 31, Year 1 } & 325,000 \\\text { Allowance for doubtful accounts-December 31, Year 1 } & 35,000 \\\text { Bad debt expense for the year } & 20,000\end{array}$

-Refer to the figure Abbot Safe & Lock.What is the effect on liquidity when the company records its estimate for bad debt expense using the allowance method?

• A) liquidity decreases
• B) liquidity increases
• C) liquidity stays the same
• D) liquidity both increases and decreases within Year 1

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Definitions:

Negligent Misconduct

Behavior or actions that fall below the legally established standard of care, leading to unintended harm or damage.

Self-Governing

Having the authority or autonomy to govern oneself or manage one's own affairs without external control.

Professional Bodies

Organizations representing the interests of professionals in a specific industry, responsible for setting standards, providing training, and enforcing ethics.

Role

Describes the function or part played by a person or thing in a particular situation or system, such as in an organization or process.