The direct write-off method is generally not permitted for financial reporting purposes because: Multiple Choice Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income. Accounts receivable are not reported for the net amount expected to be collected. This method is primarily used for tax purposes. It is too difficult to accurately estimate future bad debts.

The objective of the question is to understand why the direct write-off method is generally not…

Answered: The direct write-off method is…

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 3C: Bad Debt Expense When a company has a policy of making sales for which credit is extended, it is...

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Question

The direct write-off method is generally not permitted for financial reporting purposes because:

Multiple Choice

Compared to the allowance method, it would allow greater flexibility to managers in manipulating reported net income.
Accounts receivable are not reported for the net amount expected to be collected.
This method is primarily used for tax purposes.
It is too difficult to accurately estimate future bad debts.