Matsuzaka Company Uses the Allowance Method to Account for Uncollectible

question 110

Multiple Choice

Matsuzaka Company uses the allowance method to account for uncollectible accounts. An account that had been previously written-off as uncollectible was recovered. How would the recovery affect the company's accounting equation?

• A) Increase assets and increase equity.
• B) Increase assets and decrease liabilities.
• C) Reduce liabilities and increase equity.
• D) Have no effect on assets, liabilities, or equity.

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Definitions:

Revaluation Method

An accounting strategy used to adjust the book value of a fixed asset to reflect its current market value.

IFRS

International Financial Reporting Standards, a set of global accounting guidelines developed by the International Accounting Standards Board, providing uniform financial statement reporting.

Tangible Long-Lived Assets

Physical assets that are used in the operations of a business, have a useful life of more than one year, and are not intended for resale.

Nonmonetary Exchange

Transactions in which businesses or individuals trade goods or services without the use of money or monetary units.