If a Company Uses the Direct Write-Off Method of Accounting

question 1

Multiple Choice

If a company uses the direct write-off method of accounting for bad debts,

• A)It establishes an estimate for the allowance for doubtful accounts.
• B)It will record bad debt expense only when an account is determined to be uncollected.
• C)It will reduce the accounts receivable account at the end of the accounting period for estimated uncollected accounts.
• D)When an account is written off, total assets will stay the same.

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Definitions:

Spearman Rank

An assessment of rank correlation using a non-parametric approach that evaluates the extent to which a monotonic function can accurately describe the relationship between two variables.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two variables, ranging from -1 to 1.

Test Statistic

A number derived from sample information, employed in hypothesis testing to decide if the null hypothesis should be discarded.

Sample

A subset chosen from a larger population for the purpose of investigation.