The Following Selected Amounts Are Reported on the Year-End Unadjusted

question 46

Multiple Choice

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
• B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
• D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

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Definitions:

Yerkes-Dodson Law

A psychological principle stating that performance increases with arousal up to an optimal point, after which it decreases.

Physiological Arousal

A state of heightened physiological activity, involving increased heart rate, sweating, or rapid breathing.

Test Performance

An individual's performance or achievement on exams or assessments, measuring knowledge, ability, or skill in a particular area.

Yerkes-Dodson Law

A theory suggesting that there is an optimal level of arousal for the best performance of a task: too little or too much arousal can decrease performance.