Bad Debt Expense Is Recognized in the Same Accounting Period

question 61

Multiple Choice

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

• A)the accounts receivable asset should be stated at original cost.
• B)the exact amount of the losses from bad debts is known.
• C)revenues should be stated at realizable value plus interest.
• D)all expenses incurred in the current period should be subtracted from current period revenues.

---

Definitions:

Minimum Required Rate

The least acceptable rate of return on an investment, often used in capital budgeting to assess potential projects.

Operating Assets

Assets used by a business in its daily operations to generate revenue, excluding investments and non-essential properties.

Contribution Margin Ratio

A financial metric that shows the portion of sales revenue that exceeds variable costs, indicating how sales affect profitability.

Fixed Expenses

A rephrased definition could focus on the costs that do not vary with the level of production or business activity, which may include long-term contractual obligations and basic operational costs.