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STALIN [3.7K]
3 years ago
9

There are 2 methods of accounting for uncollectible receivables: Direct Write-Off and Allowance methods. Describe and compare th

ese methods. Make sure to include how estimates can be calculated for the Allowance method.
Business
2 answers:
Artist 52 [7]3 years ago
5 0

The correct answer is B: direct write-off method

Explanation:

Unfortunately, some sales on account may not be collected. Customers go broke, become unhappy and refuse to pay, or may generally lack the ethics to complete their half of the bargain. It is necessary to establish an accounting process for measuring and reporting these uncollectible items. Uncollectible accounts are frequently called “bad debts.”

There are two methods of accounting to manage uncollectable accounts:

1- Allowance method

2- Direct Write-off Method

2- Under this method, there is no allowance account. An account receivable is written-off directly to expense only after the account is determined to be uncollectible. This method is required for income tax purposes. The direct write-off method is easy to operate as it only requires that specific debts are written off as they are identified with a simple journal. The problem with the method, however, is that it does not comply with the matching principle, in that revenue might be recorded in one period, when the customer is invoiced, whereas the expense of writing off the uncollectible amount is recorded in a completely different period when the amount is identified as irrecoverable.

Kruka [31]3 years ago
3 0

The direct write off does not report about the bad debt and does not use the allowance where as the allowance method uses the allowance for doubtful accounts because it provides an estimate for the same.

<u>Explanation:</u>

The allowance method speaks to the accumulation and accrual basis of bookkeeping and is the acknowledged technique to record uncollectible records for monetary bookkeeping purposes. The direct write off method is utilized just when we choose a client won't pay.

The allowance method utilizes the stipend for doubtful records to catch amassed assessments of awful obligations. The direct write-off method does not report bad debt estimates; therefore, it does not use the allowance for doubtful accounts when reporting bad debts.

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3 years ago
It is likely that airplane tickets will be increased by 5% each year for the next four years. The cost of the plane ticket to De
Luba_88 [7]

Answer:

The amount to save now is = $862.03 (to 2 decimal places)

Explanation:

In order to solve this, we will compute the end-of-year amounts using the 5% increase each year. This is done as follows:

Year 1 ending = $200

Year 2:

Year 2 beginning price = $200

Note that 5% increase = 5/100 = 0.05

increase in year 2 = 5% of 200 = 0.05 × 200 = 10

Year 2 new price = 200 + 10 = $210

Year 3:

beginning price = $210

increase in year 3 = 0.05 × 210 = $10.5

Year 3 new price = 210 + 10.5 = $220.5

Year 4

beginning price = $220.5

interest in year 4 = 0.05 × 220.5 = 11.025

new price in year 4 = 220.5 + 11.025 = $231.525

Next to calculate the amount needed to pay for one travel ticket per year for the next four years, we will add the prices of the tickets each year as follows:

Total amounts needed = 200 +210 + 220.50 + 231.53 = $862.03

5 0
3 years ago
Two firms, A and B, each currently emit 100 tons of chemicals into the air. The government has decided to reduce the pollution a
katrin2010 [14]

Answer:

20 more tons of pollution into the air, and Firm B will emit 100 fewer tons of pollution into the air.

Explanation:

It is given that :

Amount of tons of pollutants emitted by the two firms A and B earlier = 100 tons

Cost of pollutants by firm A = $ 200 per ton of pollutions

Cost of pollutants by firm B = $ 100 per ton of pollutions

Since the cost for eliminating the pollutants into the air is more for the firm A, the ticket is also more valuable for firm A. And therefore, firm A will buy all the tickets form firm B for an amount around $ 101 to $ 199. It will do so as to have a positive consumer and also to produce surplus.

So firm A will eliminate 20 tons of pollution and will use 80 ton capacity from the tickets. And for firm B, it will eliminate all 100 tons of pollutions.

4 0
3 years ago
Under the allowance method of accounting for uncollectible accounts, a. the cash realizable value of accounts receivable is grea
pentagon [3]

Answer:

c. the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.

Explanation:

Under the allowance method of accounting for uncollectible accounts, the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off and bad debt expenses is debited.

This means that in the period in which an account previously written off is collected, the income is unaffected.

Also, under the allowance method of accounting, total assets will remain unchanged when a particular account is being written off.

8 0
3 years ago
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3 years ago
Read 2 more answers
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