Darby Uses the Allowance Method to Account for Uncollectible Accounts

question 132

Multiple Choice

Darby uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 4% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

• A) $4,845
• B) $4,180
• C) $3,515
• D) $3,700
• E) $3,850

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Definitions:

Pegged Exchange Rate

A currency system where a country's currency value is fixed or linked to another currency or a basket of currencies.

Fixed Exchange-rate System

A currency system where the value of a country's currency is pegged to another currency, a basket of currencies, or a commodity like gold.

Central Bank

An institution that manages a country’s currency, money supply, and interest rates, often overseeing the commercial banking system of their country or monetary union.