For a Company with Significant Uncollectible Receivables,the Direct Write-Off Method

question 72

Multiple Choice

For a company with significant uncollectible receivables,the direct write-off method is unsuitable because ________.

• A) it overstates liabilities on the balance sheet
• B) it violates the matching principle
• C) it uses estimates for determining the bad debt expense
• D) companies are not able to track customer payment histories

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Definitions:

Corporate Tax Rate

The percentage of corporate profits that is paid to the government as tax, varying by country and sometimes by the size or type of corporation.

After-Tax Salvage Value

The after-tax salvage value is the net value of a depreciated asset at the end of its useful life, after accounting for taxes on any difference between the sales price and the book value of the asset.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset evenly across its lifespan in identical yearly sums.

Tax Rate

The percentage at which an individual or corporation is taxed, often varying by income level, legal entity, or country.