When a Company That Uses the Allowance Method Writes Off

question 63

Multiple Choice

When a company that uses the allowance method writes off an actual bad debt:

• A)total assets decrease.
• B)total liabilities increase.
• C)total expenses increase and total revenues increase.
• D)total assets,revenue,and expenses remain the same.

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Definitions:

After-Tax Cash Flow

The amount of cash a company has left after it has paid taxes, often used to determine a project's or investment's viability.

Capital Asset

A long-term asset that is significant in value and is used for operations, not easily converted to cash, and often depreciates over time.

Tax Rate

The tax rate is the percentage at which an individual or corporation is taxed, which can vary depending on income level, type of income, or jurisdiction.

Present Value

The contemporary valuation of a future sum of money or sequence of cash inflows, considering a certain rate of return.