Use the Following to Answer Questions

question 165

Multiple Choice

Use the following to answer questions:
Figure: Tax on Consumers of Gadgets
-(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

• A) $800
• B) $3,200
• C) $400
• D) $200

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Definitions:

Percent of Receivables Method

A method used in accounting to estimate bad debts expense based on a percentage of accounts receivable judged to be uncollectible.

Unadjusted Trial Balance

A financial report that shows the balances of all accounts, including assets, liabilities, equity, income, and expenses before any adjustments are made for the accounting period.

Bad Debts Expense

An expense reported on the income statement reflecting the cost of accounts receivable that a company does not expect to collect.

Factoring Fee Expense

A cost incurred by a business when it sells its accounts receivable to a third party (the factor) at a discount.