Concept explainers
Distinguishing between allowance method and direct write-off method P1 P2
Indicate whether each statement best describes the allowance (A) method or the direct write-off (DW) method.
_1. Does not predict
___2.
___3. The write-off of a specific account does not affect net income.
_4. When an account is written off. the debit is to Bad Debts Expense.
___5. Usually does not best match sales and expenses because bad debts expense is not recorded until an account becomes uncollectible, which
usually occurs in a period after the credit sale.
_G. Estimates bad debts expense related to the sales recorded in that period.
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Chapter 9 Solutions
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- Indicate by a (+), (), or (0) whether each of the following events would most likely cause accounts receivable (AR), sales, and profits to increase, decrease, or be affected in an indeterminate manner:arrow_forwardWhich method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance methodarrow_forwardEach time an account is written off under the direct write-off method, Bad Debt Expense is debited.arrow_forward
- Indicate whether each statement best describes the allowance (A) method or the direct write-off (DW)method. When an account is written off, the debit is to Bad Debts Expense.arrow_forwardIndicate whether each statement best describes the allowance method or the direct write-off method. List 1. Usually does not best match sales and expenses because Bad Debts Expense is not recorded until an account becomes uncollectible, which usually occurs in a period after the credit sale. 2. When an account is written off, the debit is to Bad Debts Expense. 3. Does not predict Bad Debts Expense. 4. Accounts receivable on the balance sheet is reported at net realizable value. 5. Estimates Bad Debts Expense related to the sales recorded in that period. 6. Matches the estimated loss from uncollectible accounts receivable against the sales they helped create. Method Allowance Direct write-offarrow_forwardWhen the allowance method of recognizing uncollectible accounts is used, the entry to record the write off of a specific account would A. decrease both accounts receivable and the allowance for uncollectible accounts B. decrease accounts receivable and increase the allowance for uncollectible accounts C. increases the allowance for uncollectible accounts and decrease net income D. decrease both accounts receivable and net incomearrow_forward
- Indicate whether each statement best describes the allowance (A) method or the direct write-off (DW)method. Does not predict bad debts expense.arrow_forwardWhich following statement is a correct statement about the direct write-off method for calculating credit loss expense? A. It is in accordance with GAAP. B. It uses an allowance for credit losses account. C. It tends to understate accounts receivable on the balance sheet. D. It recognizes credit loss expense when a specific account is determined to be uncollectible.arrow_forwardUsing the following key, identify the effects of the following transactions or conditions on the various financial statement elements: I = increases; D = decreases; NE = no effect. A.credit sale b. Collection of a portion of accounts receivable c. Estimate of bad debts d. Write-off of a specific uncollectible accountarrow_forward
- Under the direct charge-off method, when a specific account receivable is written off, what account is debited and what is the effect of the write-off on net income and on assets? debit Accounts Receivable; the write off decreases net income and total assets debit Allowance for Uncollectible Accounts; the write off increases net income and total assets debit Uncollectible Accounts Expense the write off decreases net income and total assets debit Uncollectible Accounts Expense; the write off increases net income and total assets Aarrow_forwardThe allowance for doubtful is not: a. credited when bad debts expense is estimated and recorded b. a liability account c. used instead of reducing accounts receivable directly d. a contra asset account e. debited when uncollectible accounts are written offarrow_forward23) Under the allowance method, the entry to record the write-off of a specific account would A. Decrease both accounts receivable and net income B. Increase the allowance for uncollectible accounts and decrease net income C. Decrease both accounts receivable and the allowance for uncollectible accounts D. Decrease accounts receivable and increase the allowance for uncollectible accountsarrow_forward
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