A Disadvantage of Basing Bad Debt Expense on the Historical

question 2

Multiple Choice

A disadvantage of basing bad debt expense on the historical relationship between actual bad debts and the outstanding accounts receivable balance at the end of the year is that

• A) it may not recognize the cause and effect relationship between expenses and revenues.
• B) it may not result in a reasonable estimate of the net realizable value of receivables.
• C) it is not a generally accepted accounting procedure.
• D) it is an income statement approach.

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Definitions:

Weber's Law

A principle relating to perception that states the smallest change in a stimulus that can be detected is a constant proportion of the stimulus level.

Illumination

The deliberate use of light to achieve a practical or aesthetic effect.

Brightness

The perception of how light or dark a color appears; a quality of visual experience that varies with lighting conditions.

Optic Nerve

The cranial nerve that transmits visual information from the retina to the brain, playing a crucial role in the sense of sight.