You Have Just Received Notice That a Customer of Yours

question 94

Multiple Choice

You have just received notice that a customer of yours with an Account Receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to

• A) debit Bad Debt Expense and credit Allowance for Doubtful Accounts.
• B) debit Bad Debt Expense and credit Accounts Receivable.
• C) debit Allowance for Doubtful Accounts and credit Accounts Receivable.
• D) debit Allowance for Doubtful Accounts and credit Bad Debt Expense

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Definitions:

Construction Contract

A legally binding agreement between a contractor and client specifying the details of a construction project, including scope of work, timelines, and payment.

Equitable Remedy

A judicial order enforcing a party to act or refrain from acting in a certain way, distinct from awarding damages.

Material And Willful

Refers to an action done intentionally and with a solid understanding of its consequences, often used in legal contexts to describe behavior.

Status Quo

The existing state of affairs or current condition, typically used in context with agreements or legal situations.