At December 31, Before Adjusting and Closing the Accounts Had

question 135

Multiple Choice

At December 31, before adjusting and closing the accounts had occurred, the Allowance for Impairment of Seaboard Corporation showed a debit balance of $3,200. An aging of the accounts receivable indicated the amount probably uncollectible to be $2,100. Under these circumstances, a year-end adjusting entry for uncollectible accounts expense would include a:

• A) Debit to the Allowance for Impairment for $1,100.
• B) Credit to the Allowance for Impairment for $1,100.
• C) Debit to Uncollectible Accounts Expense of $2,100.
• D) Debit to Uncollectible Accounts Expense of $5,300.

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Definitions:

Fair Value

An estimate of the market price for assets or liabilities, reflecting what a willing buyer would pay a willing seller in an arm's length transaction.

Parent and Subsidiary

A parent and subsidiary relationship exists when one company, the parent, owns more than half of another company, the subsidiary, granting control and often integrating operations or management.

Consolidated Financial Statements

Consolidated financial statements aggregate the financial information of a parent company and its subsidiaries, presenting it as if the group were a single entity.

Controlling Influence

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.