Farron Corporation, Which Has Only One Product, Has Provided the Following

question 69

Multiple Choice

Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: What is the net operating income for the month under variable costing?

• A)$10,600
• B)($17,000)
• C)$16,600
• D)$6,000

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Definitions:

Allowance for Doubtful Accounts

A contra asset account that represents an estimate of the receivables that may not be collected, reducing the net value of accounts receivable.

Contra Asset

An account on a company's balance sheet representing reductions of asset accounts, such as accumulated depreciation on equipment.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit customers, calculated by dividing net credit sales by the average accounts receivable.

Allowance Method

An accounting technique used to estimate and account for doubtful debts, providing a more accurate representation of financial health.