If a Company Is Experiencing More Writeoffs Than Were Estimated

question 29

Multiple Choice

If a company is experiencing more writeoffs than were estimated,

• A)the bad debt should be reduced next period.
• B)the direct method should be implemented.
• C)the percentage of bad debts should be increased next accounting period.
• D)an adjustment should be made retrospectively.

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Definitions:

Warranty Expense

The estimated cost of honoring product warranties, which companies recognize to match expenses with related revenues.

Estimated Warranty Costs

Projected expenses that a company expects to incur to repair or replace products during a warranty period.

Estimated Liability

A financial obligation that is expected to occur but has not been finalized in amount or timing.

Warranty Expenses

Costs that a company anticipates for repairing or replacing defective products sold to customers under warranty.