When a Company Uses the Allowance Method of Accounting for Uncollectible

question 138

Multiple Choice

When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include:

• A) A credit to Bad Debt Expense
• B) A debit to Bad Debt Expense
• C) A debit to Allowance for Doubtful Accounts
• D) A credit to Allowance for Doubtful Accounts

---

Definitions:

Zero-coupon Bond

A debt security that does not pay interest but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its face value.

Semi-annually

Occurring twice a year.

Effective Annual Yield

Annualized interest rate on a security computed using compound interest techniques.

Yield Curve

A graph that shows the relationship between the interest rates and the maturity dates of debt securities issued by the same issuer.