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:

Representativeness Heuristic

A cognitive shortcut used in decision making, where an individual relies on the similarity between the item in question and a category prototype.

Divergent Thinking

Expanding the number of possible problem solutions; creative thinking that diverges in different directions.

Fixation

(1) in thinking, the inability to see a problem from a new perspective; an obstacle to problemsolving. (2) in personality theory, according to Freud, a lingering focus of pleasure-seeking the developing human organism from about 2 weeks after fertilization through the secondmonth

Divergent Thinking

A thought process or method used to generate creative ideas by exploring many possible solutions.