Following the Sept

question 88

Multiple Choice

Following the Sept. 11, 2001 Twins Towers attacks, many Americans elected to drive rather than fly: The media coverage of the hijackings caused Americans to overestimate the danger of flying. This example illustrates the ____________.

• A) availability heuristic
• B) representativeness heuristic
• C) confirmation bias
• D) stereotype bias

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Definitions:

Direct Write-Off Method

The method of writing off uncollectibles when they occur and thus not using the Allowance for Doubtful Accounts. This method does not fulfill the matching principle of accrual accounting.

Income Statement Method

A technique used to create a company's income statement to report earnings and financial performance.

Income Statement Approach

A method that estimates the amount of Bad Debts Expense that will result based on a percentage of net credit sales for the period. The amount of the expected bad debt is added to the existing balance of Allowance for Doubtful Accounts.

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services delivered, before deducting any allowance for doubtful accounts.