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:

Coupon

A detachable portion of a bond that is given up in return for the periodic interest payments.

Interest Rates

The cost of borrowing money or the return on invested funds, typically expressed as a percentage.

Yield to Maturity

The total return anticipated on a bond if it is held until it matures, considering all interest payments and capital gains or losses.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity.