[The Following Information Applies to the Questions Displayed Below

question 83

Multiple Choice

[The following information applies to the questions displayed below.]

On December 31, Year 1, the Loudoun Corporation estimated that 3% of its credit sales of $112,500 would be uncollectible. Loudoun uses the allowance method. On February 15, Year 2, one of Loudoun's customers failed to pay his $1,050 account and the account was written off. On April 4, Year 2, this customer paid Loudoun the $1,050.

-Which of the following correctly states the effect of the adjusting entry,dated December 31,Year 1,on the elements of the financial statements of the Loudoun Corporation?

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Straight-Line Method

A depreciation method where an equal amount of depreciation expense is allocated for each year of the asset's useful life.