​GAAP Requires Companies with a Large Amount of Receivables to Use

question 164

True/False

​GAAP requires companies with a large amount of receivables to use the allowance method.

Compute the depreciation expense for specific periods using the double-declining-balance method.

Apply the sum-of-the-years-digits method of depreciation.

Calculate depreciation expense using the straight-line method.

Understand the effects of depreciation on the book value of assets over time.

---

Definitions:

Written Off

The process of acknowledging that a debt is uncollectible and removing it from the accounts.

Bad Debts Expense

An estimated expense that represents the amount of receivables that are not expected to be collected.

Prepaid Rent

An asset account representing rent payments made in advance of the rental period.

Allowance Method

An accounting technique that estimates and records bad debts expense from credit sales during the period they occur.