PRC-1 · Chapter 5 · Question 86 of 100
Which of the following sets of factors would prompt a business to INCREASE its general allowance percentage?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A recession, rising unemployment, and relaxed credit terms.
Explanation
Economic downturns and relaxed credit terms increase the statistical probability that the 'normal' pool of customers will default, necessitating a higher general allowance percentage.
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