A Company Ages Its Accounts Receivables to Determine Its End

question 148

Multiple Choice

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that $39,375 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $3,285. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)\(\begin{array} { | l | r | r | } \hline \text { Bad Debt Expense } & 36,090 & \\ \hline \text { Allowance for Doubtful Accounts } & & 36,090 \\ \hline \end{array}\)
• B)\(\begin{array}{|c|c|c|} \hline \text { Bad Debt Expense } & 42,660 & \\ \hline \text { Allowance for Doubtful Accounts } & & 42,660 \\ \hline \end{array}\)
• C)\(\begin{array}{|c|r|r|} \hline \text { Bad Debt Expense } & 39,375 & \\ \hline \text { Allowance for Doubtful Accounts } & & 39,375 \\ \hline \end{array}\)
• D)\(\begin{array} { | l | r | r | } \hline \text { Accounts Receivable } & 39,375 & \\ \hline \text { Bad Debt Expense } & 3,285 & \\ \hline \text { Sales } & & 42,660 \\ \hline \end{array}\)

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Definitions:

Minimum Wage

The minimum wage is the lowest legal wage that employers can pay their workers, set by government policy to ensure a minimum standard of living for workers.

Employment

The condition of having paid work or being engaged in a job or business.

Labor-Market Discrimination

The practice of employers differentiating among workers on the basis of race, gender, religion, age, or other non-job-related factors.

Interview

A formal conversation between two or more people where questions are asked to gather information or assess qualifications.