(Bad-Debt Accounting) Simms Company has significant amounts of trade accounts receivable. Simms uses the allowance method to estimate bad debts instead of the direct write-off method. During the year, some specific accounts were written off as uncollectible, and some that were previously written off as uncollectible were collected.Instructions(a) What are the deficiencies of the direct write-off method?(b) Briefly describe the allowance method to estimate bad debts and the theoretical justification for its use?(c) How should Simms account for the collection of the specific accounts previously written off as uncollectible?
(Bad-Debt Accounting) Simms Company has significant amounts of trade accounts receivable. Simms uses the allowance method to estimate bad debts instead of the direct write-off method. During the year, some specific accounts were written off as uncollectible, and some that were previously written off as uncollectible were collected.Instructions(a) What are the deficiencies of the direct write-off method?(b) Briefly describe the allowance method to estimate bad debts and the theoretical justification for its use?(c) How should Simms account for the collection of the specific accounts previously written off as uncollectible?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter5: Sales And Receivables
Section: Chapter Questions
Problem 85APSA: Determining Bad Debt Expense Using the Aging Method At the beginning of the year, Tennyson Auto...
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(Bad-Debt Accounting) Simms Company has significant amounts of trade
Instructions
(a) What are the deficiencies of the direct write-off method?
(b) Briefly describe the allowance method to estimate bad debts and the theoretical justification for its use?
(c) How should Simms account for the collection of the specific accounts previously written off as uncollectible?
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