At the End of 2012, Murray State Lenders Had a Balance

question 90

Multiple Choice

At the end of 2012, Murray State Lenders had a balance in its Allowance for Uncollectible Accounts of $4,500 (debit) before any adjustment. The company estimated its future uncollectible accounts to be $12,000 using the percentage-of-receivables method. Murray State's adjustment on December 31, 2012, to record its estimated uncollectible accounts included a:

• A) Credit to Allowance for Uncollectible Accounts of $12,000.
• B) Debit to Bad Debt Expense of $16,500.
• C) Credit to Allowance for Uncollectible Accounts of $16,500.
• D) Both b and c.

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Definitions:

Purchase Money Security Interest (PMSI)

A legal claim that allows a lender to repossess or foreclose on property if the borrower defaults on the loan used to purchase the property.

Collateral

Property or assets that a borrower offers to a lender as security for a loan. If the borrower defaults, the lender may seize the collateral to recoup its losses.

Automatic Stay

A legal provision that halts actions by creditors to collect debts from a debtor who has declared bankruptcy, giving the debtor temporary relief.

Chapter 7

A type of bankruptcy that involves the liquidation of a debtor's non-exempt assets by a trustee to pay creditors.