A Company Has Net Sales of $50,000 During the Year

question 130

Multiple Choice

A company has net sales of $50,000 during the year.At year end (before an adjustment is made) ,Allowance for Uncollectible Accounts has a credit balance of $2,500.If the company estimates that 3 percent of net sales are uncollectible and the company uses percentage of net sales method,what is the balance in the allowance account after the year-end adjustment has been made?

• A) $1,500 debit balance
• B) $1,500 credit balance
• C) $4,000 credit balance
• D) $1,000 debit balance

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Definitions:

Price Level

A gauge of the overall current prices for a broad range of goods and services manufactured in the economy.

Nominal GDP

The market value of all final goods and services produced within a country in a given period, measured in current prices without adjusting for inflation.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate measure of an economy's size and how it's grown over time.

Market Basket

A representative collection of goods and services used to track price changes for consumer expenditure and calculate inflation rates.