Abbott Company Uses the Allowance Method of Accounting for Uncollectible

question 115

Multiple Choice

Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be

• A) $1,200
• B) $3,000
• C) $3,600
• D) $7,200

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Definitions:

Elastic Demand

A situation where the demand for a product is sensitive to price changes.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved, resulting in a mismatch between supply and demand.

Deadweight Loss

The loss of economic efficiency that occurs when the optimal level of supply and demand is not achieved.

Labor Market

The demand and supply of labor, in which individuals look for jobs and employers search for employees.