A Company Has $80,000 in Outstanding Accounts Receivable and It

question 24

True/False

A company has $80,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current credit balance (before adjustments) in the allowance for doubtful accounts is $1,200. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for $4,800.

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Definitions:

Hypothetical Thinking

The ability to consider multiple possibilities and outcomes of situations that are not necessarily rooted in current reality.

Formal Operational Stage

The stage in Piaget's theory of cognitive development (beginning around age 12) where individuals develop the ability to think abstractly, reason logically, and plan systematically.

Cognitive Development

The study of how thinking, problem solving, and intelligence change and mature through childhood into adulthood.

Object Permanence

The understanding that objects continue to exist even when they cannot be perceived.