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

question 101

Multiple Choice

An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $4,000. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record the bad debt expense for the period will require a

• A) debit to Bad Debt Expense for $5,200.
• B) debit to Bad Debt Expense for $4,000.
• C) debit to Bad Debt expense for $2,800
• D) credit to Allowance for Doubtful Accounts for $5,000.

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Definitions:

Gross Profit

The difference between sales revenue and the cost of goods sold, showing the basic profitability of a company's core business activities.

Multiple-Step

An income statement format that separates operating revenues and expenses from non-operating ones to calculate net income.

Operating Expenses

Costs associated with the daily operations of a business, excluding cost of goods sold, directly related to generating revenue.

Nonoperating Activities

Nonoperating activities involve the revenues and expenses that are not related to the core operations of a business.