The Direct Write-Off Method for Bad Debts

question 17

Multiple Choice

The Direct Write-off Method for bad debts:

• A)Removes a customer's uncollectible account receivable and records a bad debt expense and is recorded at the time a specific customer's account becomes uncollectible
• B)Complies with GAAP
• C)Estimates bad debt expense and establishes an allowance or reserve for uncollectible
• D)None of these

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Definitions:

Direct Labor

The cost of employee labor that is directly involved in the manufacturing or production of goods or services.

Factory Overhead

Represents all indirect costs associated with the production process, including utilities, maintenance, and managerial salaries not directly traceable to specific products.

Factory Overhead Rates

The rates at which indirect manufacturing costs are applied to units produced, based on a predetermined allocation base.

Direct Labor Hours

The total time spent by workers directly involved in the production process, contributing to the cost of manufacturing goods.