Upstart Enterprise's Total Revenue for Last Year Is $300,000, and It

question 14

Multiple Choice

Upstart Enterprise's total revenue for last year is $300,000, and it estimates 2% of revenue as bad debts. Which of the following journal entries records the bad debts expense under the allowance method?

• A) Debit Allowance for Doubtful Accounts by $6,000, and credit Bad Debts Expense by $6,000.
• B) Debit Accounts Receivable by $6,000, and credit Bad Debts Expense by $6,000.
• C) Debit Bad Debts Expense by $6,000, and credit Accounts Receivable by $6,000.
• D) Debit Bad Debts Expense by $6,000, and credit Allowance for Doubtful Accounts by $6,000.

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Definitions:

Political Economy

An interdisciplinary branch that studies the relationships between individuals, governments, and public policy, focusing on the economic implications of political actions.

Adam Smith

A Scottish economist, philosopher, and author known for his theories on free market economics presented in his book "The Wealth of Nations."

Invisible Hand

A metaphor introduced by economist Adam Smith to describe the self-regulating behavior of the marketplace, where individuals acting in their own self-interest inadvertently benefit society at large.

Petty Bourgeoisie

Class of small business owners and employees who own some means of production but do not exploit large labor forces, often seen as part of the middle class.