When a Company Uses the Allowance Method to Measure Bad

question 109

Multiple Choice

When a company uses the allowance method to measure bad debts,________.

• A)the Bad Debts Expense account is debited when an account is written off
• B)the amount of bad debts expense is estimated at the end of the accounting period
• C)the Allowance for Bad Debts account balance is added to the balance of the Accounts Receivable account to arrive at the net realizable value
• D)the Allowance for Bad Debts account is debited when the bad debts expense is estimated

---

Definitions:

Income Before Taxes and Interest

Net earnings of a company before accounting for interest and tax expenses, used to analyze operating performance without financing or tax influences.

Accounts Receivable Turnover

A financial ratio that measures how many times a company can turn its accounts receivable into cash within a specific period.

Account Receivables Balance

The total amount of money owed to a company by its customers for goods or services delivered on credit.

Net Credit Sales

The total revenue from sales made on credit, minus returns and allowances, during a specific period.