The Direct Write Off Method to Accounting for the Impairment

question 4

Multiple Choice

The direct write off method to accounting for the impairment of receivables

• A)Is never an acceptable method.
• B)Is an acceptable method when the effect of not applying the allowance method would be immaterial.
• C)Is specifically disallowed under private entity GAAP.
• D)Would usually result in the same net income as the allowance method.

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Definitions:

Variable Costing

A costing method that includes only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in product costs and treats fixed manufacturing overhead as a period expense.

Generally Accepted Accounting Principles

A set of accounting standards, guidelines, and procedures used in the preparation of financial statements to ensure consistency and transparency.

Stockholders

Individuals or entities that own shares in a corporation, giving them various rights like voting on company matters and receiving dividends.

Cost-Volume-Profit Graph

A visual representation that shows how changes in cost, volume, and profit affect a business.