Which of the Following Statements Regarding Methods of Accounting for Bad

question 99

Multiple Choice

Which of the following statements regarding methods of accounting for bad debts is true?

• A)When the allowance method is used,the journal entry to write-off an uncollectible account does not change the amount reported as net accounts receivable on the balance sheet.
• B)The two methods of accounting for bad debts that are acceptable under GAAP are the allowance method and the direct write-off method.
• C)When the allowance method is used,if actual results differ from the estimates,the prior year financial statements must be corrected.
• D)When the allowance method is used,bad debt expense is equal to the write-offs that occurred during the period.

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Definitions:

Direct

involves straight or firsthand transmission or provision of goods, services, or communication without the involvement of an intermediary.

Materials Traceable

Direct materials that can be directly identified and assigned to the manufacturing process of a specific product.

Specific Products

Goods that are distinctly defined or particularized among a broader range of products.

Prime Cost

Prime cost refers to the combined direct costs of raw materials and labor that are directly involved in the production of goods.