Question

If the direct write-off method is used to account for uncollectible accounts, which of the following statements is false? Multiple Choice No adjustment is made at the end of the year to estimate future uncollectible accounts. Accounts receivable will be reported at the net amount of cash expected to be collected. Bad debt expense is recorded at the time an actual bad debt is written-off. An allowance account is not used.

Answer 1

Answer:

Accounts receivable will be reported at the net amount of cash expected to be collected.

Bad debt expense is recorded at the time an actual bad debt is written-off.

Explanation:

Accounts receivable will be reported at the net amount of cash expected to be collected. One of the criticism of the direct match off method is that its violate the matching concept and as such account receivable won't be equal to the net amount of cash.

Bad debt expense is recorded at the time an actual bad debt is written-off. Bad debt is recorded when the debt is deemed to be irrecoverable.

Answer 2

Answer:

Accounts receivable will be reported at the net amount of cash expected to be collected.

Explanation:

Direct write-off method of uncollectable accounts is a technique that is employed to report bad debt associated with credit sales in which no allowance account is kept. What is simply done is to only write off account receivable directly to expense immediately it is ascertained that the account receivable is uncollectable.

Therefore, it is false that accounts receivable will be reported at the net amount of cash expected to be collected under direct write-off method.