Gideon Company Uses the Allowance Method of Accounting for Uncollectible $$\begin{array} { | l | r | r | } \hline \text { Cash } & 2,000 & \\\hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\\hline\end{array}$$

question 82

Multiple Choice

Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. On July 10, the entry or entries Gideon makes to record the recovery of the bad debt is:

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | r | r | }
• \hline \text { Allowance for Doubtful Accounts } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkinse } & & 2,000 \\
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Cash } & & 2,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Allowance for Doubtful Accounts } & & 2,000 \\
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | r | r | }
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline
• \end{array}\]
• E) \[\begin{array} { | l | r | r | }
• \hline \text { Accounts Receivable -A. Hopkins } & 2,000 & \\
• \hline \text { Bad debts expense } & & 2,000 \\
• \hline \text { Cash } & 2,000 & \\
• \hline \text { Accounts Receivable -A. Hopkins } & & 2,000 \\
• \hline
• \end{array}\]

---

Definitions:

Disposable Income

The amount of money individuals or households have to spend or save after taxes have been deducted.

Carrying Costs

Expenses associated with holding inventory, including storage, handling, insurance, and spoilage costs.

Variable Cost

Costs that change in proportion to the activity of a business such as production volume or sales.

Unit Variable Cost

The cost associated with producing one additional unit of a product, including labor and materials, which varies with the production volume.