27The direct write-off method is generally not permitted for financial reporting purposes becauseMultiple ChoiceоAccounts receivable are not stated for the amount of cash expected to be collected.Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income.ОIt is too difficult to accurately estimate future bad debts.This method is primarily used for tax purposes.

Compared to the allowance method, it would allow greater flexibility to managers in manipulating…

Answered: 27 The direct write-off method is…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

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Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 9MC: Which method delays recognition of bad debt until the specific customer accounts receivable is...

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The direct write-off method is generally not permitted for financial reporting purposes because: Multiple Choice Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income. Accounts receivable are not reported for the net amount expected to be collected. This method is primarily used for tax purposes. It is too difficult to accurately estimate future bad debts.
A disadvantage of basing bad debt expense on the historical relationship between actual bad debts and the outstanding accounts receivable balance at the end of the year is that A it is not a generally accepted accounting procedure. B it is an income statement approach. C it may not recognize the cause and effect relationship between expenses and revenues. D it may not result in a reasonable estimate of the net realizable value of receivables.
Estimation of uncollectible accounts receivable based on accounts receivable Group of answer choices Emphasizes measurement of bad debt expense Emphasizes measurement of the net realizable value of accounts receivable Emphasizes measurement of total assets Is only acceptable for tax purposes
Management can choose between two bases in calculating the estimated uncollectible accounts under the allowance method. One basis emphasizes an income statement viewpoint whereas the other emphasizes a statement of financial position viewpoint. Identify the two bases and contrast the two approaches. How do the different points of view affect the amount recognized as Bad Debts Expense during the accounting period?
When a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAAP.
Which of the following is a limitation of the direct write-off method of accounting for uncollectibles? a. The direct write-off method overstates assets on the balance sheet. b. The direct write-off method does not match expenses against revenue very well. c. The direct write-off method does not set up an allowance for uncollectibles. d. All of the above
When a large account receivable balance is due from one client it is logical to use the direct write-off method to adjust the bad debt expense and accounts receivable balance. Under different circumstances, another method is used called the allowance method. Discuss the best reason(s) for using the allowance method and give some examples of companies that are likely to use that method. Also explain why it would ever be appropriate to use the direct write-off method, especially since it is not GAA
Which of the following statements is false? Group of answer choices A)The journal entry to record bad debt expense decreases current assets. b)The journal entry to record bad debt expense decreases retained earnings. C)The journal entry to write-off an uncollectible account receivable decreases operating income. D)The journal entry to write-off an uncollectible account receivable does not affect current assets. e)All the above statements are correct.
Answer the following questions in depth .... Isn't estimating bad debts a way of manipulating net income? How does a company keep control on these estimates? How does one go about determining if noncollectable receivables are within a reasonable range?
Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance method
Which account type is used to record bad debt estimation and is a contra account to Accounts Receivable?
If the amount of bad debts is significant, use of the direct write-off method increases the usefulness of both the income statement and statement of financial position. Select one: True False

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