The Following Information Pertains to Lightning, Inc Lightning Uses the Percentage-Of-Credit-Sales Method and Estimates 1% of Sales

question 63

Multiple Choice

The following information pertains to Lightning, Inc. at the end of the year: $$\begin{array} { l r } \text { Credit Sales } & \$ 60,000 \\\text { Accounts Payable } & 10,000 \\\text { Accounts Receivable } & 7,000 \\\text { Allowance for Uncollectible Accounts } & 400 \text { credit } \\\text { Cash Sales } & 20,000\end{array}$$ Lightning uses the percentage-of-credit-sales method and estimates 1% of sales are uncollectible. What is the ending balance of the allowance account after the year-end adjustment?

• A) $600.
• B) $1,000.
• C) $200.
• D) $1,200.

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Definitions:

Capital Stock

The total amount of a company's share equity including both common and preferred shares, representing the initial investment in the business.

Free Cash Flow

A measure that assesses a company’s ability to fund its capital expenditures and dividends from its net cash provided by operating activities.

Indirect Method

A technique used in cash flow statements where net income is adjusted for non-cash transactions and changes in working capital to calculate cash flow from operating activities.

Property Plant Equipment

Long-term tangible assets held for business use and not expected to be converted into cash in the current or upcoming fiscal year, including land, buildings, machinery, and vehicles.