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question 173

Multiple Choice

[The following information applies to the questions displayed below.]
Dynamic,Inc.had credit sales of $675,000 for March.Accounts receivable of $6,000 were determined to be worthless and were written off during March.Accounts receivable total $575,000 at March 31.Management feels that based on past experience,approximately 2% of net credit sales will prove to be uncollectible.
-Assuming Dynamic,Inc.uses the income statement approach (an allowance method) to account for uncollectible accounts,uncollectible accounts expense for March is:

• A)$11,500.
• B)$17,500.
• C)$19,500.
• D)$13,500.

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Definitions:

Constant-growth Dividend-discount Model

A method for valuing a stock by assuming that dividends grow at a constant rate indefinitely, used to estimate the stock's price based on future dividend payments.

Multifactor CAPM

Generalization of the basic CAPM that accounts for extra-market hedging demands.

APT

The Arbitrage Pricing Theory, a multifactor model used to determine asset returns based on the relationship between a financial asset's expected return and its risks.

Hedge Portfolios

Investment portfolios designed to reduce the risk of adverse price movements in an asset, often by using derivatives such as options and futures.