Bad Debt Expense Is Recognized in the Same Accounting Period

question 45

Multiple Choice

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

• A) the accounts receivable asset should be stated at original cost.
• B) the exact amount of the losses from bad debts is known.
• C) revenues should be stated at realizable value.
• D)all costs incurred in the current period should be subtracted from current period revenues.

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Definitions:

Fixed Manufacturing Cost

Costs that do not change with the level of production output, such as rent, insurance, and salaries of permanent staff.

Monthly Production Volume

The total quantity of goods and services produced by a company in a single month, often measured to track efficiency and productivity.

Mixed Cost

Expenses that have both fixed and variable components, changing in total with the level of activity but also containing a constant element.

Least-squares Regression

A statistical technique that identifies the most accurate line of fit by reducing the total of the squared differences between the actual and forecasted values.