Which of the Following Statements Is TRUE of the Direct

question 58

Multiple Choice

Which of the following statements is TRUE of the direct write-off method?

• A) GAAP requires public companies to follow the direct write-off method.
• B) It provides better matching of revenues with expenses.
• C) It results in more accurate net income than any other method.
• D) It is only suitable for small companies that have very few uncollectible receivables.

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Definitions:

Chapter 7

A bankruptcy process outlined in the United States Bankruptcy Code whereby a debtor's assets are liquidated to pay off creditors.

Bankruptcy

A judicial procedure allowing individuals or companies that cannot pay off their debts to obtain relief from part or all of their financial obligations.

$200 Payment

A financial transaction involving the transfer of two hundred dollars from one party to another.

Priority Claims

In bankruptcy proceedings, debts that are entitled to be paid before other debts due to their importance as defined by law, such as taxes and employee wages.