Question

Choose the correct statement(s) below regarding A. the direct write-off method for calculating bad debt expense. B. It is not normally consistent with GAAP and accrual accounting. C. Its use tends to result in an overstatement of accounts receivable on the balance sheet. D. Under this method, bad debt expense is recognized when a specific account is determined to be uncollectible.

Answer 1

Answer: The correct answer is "B, C, and D".

Explanation: All of these are corrects statements regarding the direct write-off method for calculating bad debt expense.

• This method is generally not consistent with GAAP and accrual accounting.
• Using this method generally causes an over estimate of accounts receivable in the company's balance sheet.
• One of the peculiarities of this method is that it only recognizes the expense for bad debts when a specific account is determined uncollectible.