Which of the Following Statements Is True Regarding the Two

question 124

Multiple Choice

Which of the following statements is true regarding the two allowance methods used to account for bad debts?

• A)The percentage of net credit sales approach takes into account the existing balance in the Allowance for Doubtful Accounts account.
• B)The direct write-off method takes into account the existing balance in the Allowance for Doubtful Accounts account.
• C)The percentage of accounts receivable approach takes into account the existing balance in the Allowance for Doubtful Accounts account.
• D)The direct write-off method does a better job of matching revenues and expenses.

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Definitions:

Retained Earnings

Retained earnings reflect the cumulative amount of net income earned by a company that is kept within the company after dividends are paid to shareholders.

AASB 3

Specifies the accounting requirements for business combinations, detailing how an acquirer should recognize and measure the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree.

Revaluation

The process of adjusting the book value of a fixed asset or foreign currency to reflect current market values.

Inventory

The total amount of goods and materials held by a company intended for sale or production.