The Direct Write-Off Method of Accounting for Bad Debts

question 97

Multiple Choice

The direct write-off method of accounting for bad debts

• A) Often fails to match bad debt losses with sales for the same period
• B) Is subject to a significant amount of estimation error
• C) Causes accounts receivable to appear on the balance sheet at their estimated net realizable value
• D) Requires that losses from bad debts be recorded in the period in which sales are made

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Definitions:

Rent Controls

Government-imposed limits on the rent that landlords can charge tenants, intended to keep housing affordable.

Homelessness

The condition of people without a permanent dwelling, such as a house or apartment, often unable to acquire and maintain regular, safe, and adequate housing.

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes as a result of a change in price.

Elastic Supply

Refers to a situation where the quantity of a good supplied by producers changes significantly in response to a small change in its price.