When Is It Acceptable to Use the Direct Write-Off Method

question 75

Multiple Choice

When is it acceptable to use the direct write-off method to account for uncollectible accounts?

• A)When the expected bad debts are significant.
• B)When the company pledges its accounts receivables.
• C)It is never acceptable use the direct write-off method under GAAP
• D)When the expected bad debts are not significant.
• E)When the company sells its accounts receivables.

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Definitions:

Unit Volume

A measurement quantifying the number of units of a product sold or produced.

Volume Objectives

Objectives set by a company to achieve a specified quantity of sales or production volume within a certain timeframe.

Carrying Costs

Expenses related to holding inventory, including storage costs, insurance, and loss due to obsolescence.

Market Share

The proportion of the entire sales volume in a market that is held by a specific brand, product, or company.