GAAP Requires Most Companies to Use The

question 56

Multiple Choice

GAAP requires most companies to use the:

• A)direct write-off method to evaluate bad debts.
• B)allowance method to evaluate bad debts.
• C)amortization method to evaluate bad debts.
• D)360-day method to evaluate bad debts.

---

Definitions:

Supplies

Items used in the day-to-day operations of a business, often consumable in nature, such as office supplies, manufacturing materials, or maintenance necessities.

Equipment

Tangible property used in the operations of a business, such as machinery and tools, which are not intended for sale.

Incremental Borrowing Rate

The interest rate a company would have to pay if it borrows funds, used as a benchmark in lease agreements to calculate the present value of minimum lease payments.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time.