Bay Company Began Using the Allowance Method in 2014

question 133

Multiple Choice

Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account.
The balance in Accounts Receivable as of December 31, 2014 was

• A) $7,000.
• B) $4,000.
• C) $8,000.
• D) $500.

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Definitions:

Narcotics

Drugs that relieve pain and induce sleep, often used medically for pain relief, but can be subject to misuse and addiction.

Psychoactive Drugs

Substances that affect the mind, altering mood, perception, or brain function.

Perception

The process by which individuals organize and interpret sensory information to form a meaningful picture of the world.

Central Nervous System

The complex of nerve tissues that controls the activities of the body. In vertebrates, it comprises the brain and the spinal cord.