Which of the Following Is a Similarity Between the Allowance

question 15

Multiple Choice

Which of the following is a similarity between the allowance method and the direct write-off method of accounting for bad debts?

• A) Both the methods require an estimate of bad debt expense.
• B) Both the methods provide for writing or charging off of uncollectible customers' accounts.
• C) Both the methods are consistent with the accrual basis of accounting.
• D) Both the methods are allowed under GAAP (generally accepted accounting principles).
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Definitions:

Preference Shares

Shares which have rights to dividends that are paid out before dividends to common shareholders and may have priority over common shares in the event of liquidation.

Goodwill

Represents the excess amount paid over the fair market value of the net assets during an acquisition, attributed to factors like brand reputation, customer relations, and intellectual property.

Acquisition Differential

The difference between the cost of acquiring a company and the fair value of its identifiable net assets at the time of acquisition, essentially another term for goodwill.

Trademarks

Symbols, names, phrases, or logos legally registered or established by use as representing a company or product.