Multiple Choice Questions Chapter7 1. The year-end adjusting entry to recognize bad debts expense will be a. increase assets and decrease equity b. decrease assets and decrease equity. c. increase liabilities and increase equity. d. decrease liabilities and increase equity. On January 1, 2013 Grant Company had a $4,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2007, Grant provided $25,000 of service on account. The company 2. 4,000 cash from account receivable. Bad debts are estimated to be 2% of collected $2 sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the 2007 statement of cash flows is a. $24,850. b. $25,000. c. $22,900. d. $24,000. 3. Hall Company uses the allowance method to account for bad debts. An account that had been previously written-off as uncollectible was recovered. How would the recovery affect the company's accounting equation? a. Increase assets and increase equity b. Increase assets and decrease liabilities c. Reduce liabilities and increase equity d. Have no effect on assets, liabilities or equity