Kevin Jarvis Is the Controller of Bitterroot Industries

question 32

Multiple Choice

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000

• A)$5,600 favorable
• B)$5,600 unfavorable
• C)$30,400 favorable
• D)$34,000 unfavorable

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Definitions:

Allowance for Doubtful Accounts

A contra-account reducing accounts receivable to reflect the estimated portion that may not be collected.

Uncollectibles

Debts owed to a company that are considered unlikely to be paid and are therefore written off as a loss.

Income Statement Approach

A method to prepare the bad debt expense by estimating uncollectible accounts at the end of each period based on expected losses.

Accounts Receivable

Represents the money owed to a company by its customers for goods or services delivered on credit.