If It Is Known That a Debtor Cannot Pay Because

question 22

Multiple Choice

If it is known that a debtor cannot pay because of bankruptcy,the amount to be written off is shown as:

• A) A credit on the income statement, as a negative expense, and as a debit on the balance sheet
• B) A credit on the income statement and as a debit on the statement of financial position by increasing the amount shown for receivables
• C) A debit on the income statement and as a credit on the statement of financial position by reducing the amount shown for receivables
• D) None of the above statements are correct

---

Definitions:

Monopolistic Competition

A market structure in which many companies sell products that are similar but not identical, allowing for competition on factors other than price.

Long Run

A period in economics where all factors of production and costs are variable.

Zero Economic Profit

A situation where a firm's total revenues exactly equal its total costs, including opportunity costs. It is also referred to as normal profit.

Profit-Maximizing Price

The price at which a firm can sell its product to achieve the highest possible profit.