Which of the Following Is a CORRECT Statement Regarding the Direct

question 36

Multiple Choice

Which of the following is a CORRECT statement regarding the direct write-off method for uncollectible accounts?

• A)Most companies use the direct-write off method for their financial statements.
• B)Companies are required to use the direct write-off method for federal income tax purposes.
• C)A company records the Uncollectible-Account Expense when it writes off an individual account receivable.
• D)Both B and C.

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Definitions:

Debt Trading Security

A financial instrument representing a debt that can be bought or sold in the securities market.

Available-for-sale

A classification of securities that are not actively managed for trading or held to maturity but can be sold for cash needs or other purposes.

Unrealized Holding Gain

Refers to an increase in the value of an investment that has not been sold yet, thus the gain is not "realized."

Passive Debt Investments

Investments in debt instruments, such as bonds, where the investor does not exert influence over the issuer.