When Using the Allowance Method,after a Company Has Previously Written

question 191

Multiple Choice

When using the allowance method,after a company has previously written off an account,________.

• A) the company continues to send monthly statements to the customers whose accounts have been written off
• B) the company cannot collect from these customers because their accounts have been written off
• C) when a customer pays on an account that has been written off, the company needs to reverse the write-off to the Allowance for Bad Debts account and then record the receipt of cash
• D) the company does not need to reestablish the receivable account

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Definitions:

M'Naghten

Refers to the M'Naghten Rule, a legal standard for determining the insanity of a defendant, based on their ability to understand right from wrong at the time of the crime.

Psychosis

State involving a loss of contact with reality as well as an inability to differentiate between reality and one’s subjective state.

American Law Institute (ALI) Rule

A legal standard for insanity that assesses whether a defendant lacked the capacity to understand the wrongfulness of their actions or conform their conduct to the law due to mental illness.