Shupe IncEstimates Uncollectible Accounts Based on the Percentage of Accounts Receivable

question 138

Multiple Choice

Shupe Inc.estimates uncollectible accounts based on the percentage of accounts receivable.What effect will recording the estimate of uncollectible accounts have on the accounting equation?

• A)Increase liabilities and decrease stockholders' equity
• B)Decrease assets and decrease liabilities
• C)Decrease assets and decrease stockholders' equity
• D)Increase assets and decrease stockholders' equity

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Definitions:

Marginal Cost

The price of creating an additional unit of any given product or service.

Profit-Maximizing Monopoly

A monopoly that adjusts its output level to where marginal costs equal marginal revenues to achieve the highest possible profit.

Additional Unit

In economics, refers to the next item or unit of production, used in analyzing the costs and benefits of producing one more unit of a good or service.

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the total quantity produced, representing the cost per unit of output.