To Record Estimated Bad Debts Under the Direct Write-Off Method

question 59

Multiple Choice

To record estimated bad debts under the direct write-off method:

• A) debit Allowance for Uncollectible Accounts and credit Accounts Receivable.
• B) debit Accounts Receivable and credit Allowance for Uncollectible Accounts.
• C) debit Uncollectible-Accounts Expense and credit Allowance for Uncollectible Accounts.
• D) no journal entry is needed.

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Definitions:

Full Capacity

The maximum level of output that a company can produce under normal conditions over a given time period.

EFN

Expected Funds Needed, an estimation of the additional financing a company will require in the future based on its projected growth and existing financial structure.

Sustainable Growth Rate

The maximum rate at which a company can grow its sales and earnings without increasing leverage or debt financing.

Leverage Ratios

Financial metrics that assess the level of debt in a company's capital structure relative to its equity or assets.