If a Company Uses the Direct Write-Off Method of Accounting

question 1

Multiple Choice

If a company uses the direct write-off method of accounting for bad debts,

• A)It establishes an estimate for the allowance for doubtful accounts.
• B)It will record bad debt expense only when an account is determined to be uncollected.
• C)It will reduce the accounts receivable account at the end of the accounting period for estimated uncollected accounts.
• D)When an account is written off, total assets will stay the same.

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Definitions:

Null Hypothesis

A statistical hypothesis that assumes no significant difference or effect exists.

Interval Estimate

An estimate of a population parameter that specifies a range of possible values.

Constituency

A body of voters in a specified area who elect a representative to a legislative body.

Significance Level

The probability of rejecting the null hypothesis when it is actually true, often denoted by alpha (α) and used as a threshold in hypothesis testing.