When Comparing the Direct Write-Off Method and the Allowance Method

question 60

Multiple Choice

When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method

• A) uses a percentage of sales method to estimate uncollectible accounts.
• B) is used primarily by large companies with many receivables.
• C) is used primarily by small companies with few receivables.
• D) uses an allowance account.

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Definitions:

Long Run

An economic phase characterized by the variability of all production inputs and expenses.

Industry Supply Curve

It represents the total quantity of goods or services that producers in an industry are willing and able to supply at various price levels.

Elastic

Describes a situation where the quantity demanded or supplied of a good or service is sensitive to changes in its price.

Intensive Use

Utilization of resources or land to their maximum potential to achieve high output or productivity.