Which of the Following Statements Is Incorrect in Relation to the Direct

question 7

Multiple Choice

Which of the following statements is incorrect in relation to the direct write-off method of accounting for bad debts?

• A) There is no contra asset account for estimated doubtful debts.
• B) Bad debts are charged as an expense at the time an account is determined to be uncollectable.
• C) The entry to write off bad debts is DR Bad debts expense, DR GST payable, CR Accounts receivable.
• D) Bad debts expense is recorded in the same period in which its related sales revenue is included as income.

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Definitions:

Useful Life

The estimated duration of time that an asset is expected to be economically usable by an entity, affecting its depreciation calculation.

Product Cost Concept

A concept used in applying the cost-plus approach to product pricing in which only the costs of manufacturing the product, termed the product cost, are included in the cost amount to which the markup is added.

Manufacturing Costs

Manufacturing costs encompass all expenses directly involved in the production of goods, including materials, labor, and overhead.

Markup

The difference between the cost of a product and its selling price, expressed as a percentage over cost.