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

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Definitions:

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or sold within a year.

Salvage Value

The projected remaining worth of an asset upon reaching the end of its serviceable life.

Straight-Line Depreciation

A formula for distributing the cost of a tangible asset over its period of usability in consistent annual sums.

Production Line

A sequence of operations that assembles or manufactures products in a factory.