An Aging of a Company's Accounts Receivable Indicates That the Estimate

question 136

Multiple Choice

An aging of a company's accounts receivable indicates that the estimate of the uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $800 credit balance, the adjustment to record the bad debt expense for the period will require a

• A) debit to Allowance for Doubtful Accounts for $3,200
• B) debit to Bad Debt Expense for $3,200
• C) debit to Allowance for Doubtful Accounts for $4,000
• D) credit to Allowance for Doubtful Accounts for $4,000

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Definitions:

LIFO

"Last In, First Out" is an inventory valuation method where the last items placed in inventory are the first ones to be used or sold.

Ending Inventory

The financial value of items up for sale at the end of a fiscal period.

Lower of Cost or Market

An accounting principle requiring companies to value and report their inventory at the lower of the original cost or its current market price.

Inventory Item

An individual product or article that is held in stock by a business for the purpose of resale or production.