One of the methods for recognizing uncollectible accounts is the direct write-off method. Indicate whether each of the following statements is true or false.________ a) The direct write-off method is not permitted by GAAP if uncollectible accounts expense is immaterial.________ b) The direct write-off method is allowed for some companies because of the going concern concept.________ c) The direct write-off method requires an advance estimate of anticipated uncollectible accounts.________ d) The direct write-off method is easier to use than the allowance method.________ e) The direct write-off method does not require the use of an allowance account.

Question

What will be an ideal response?

Answer 1

a) F b) F c) F d) T e) T

a) This is false. GAAP permits the use of the direct write-off method if uncollectible accounts expense is immaterial..
b) This is false. The going concern concept does not allow for the use of the direct write-off method.
c) This is false. Only the allowance method requires an advance estimate of anticipated uncollectible accounts.
d) This is true The direct write-off method is easier to use than the allowance method because it does not require estimates.
e) This is true. There is no allowance account if a company uses the direct write-off method.