Asked by McKenzie Copher on May 08, 2024
Verified
All of the following statements regarding the allowance method are true except:
A) The allowance method estimates bad debts expense at the end of each accounting period and records it with an adjusting entry.
B) The Allowance for Doubtful Accounts is a contra asset account.
C) The Allowance for Doubtful Accounts is subtracted from Accounts Receivable to report receivables at realizable value.
D) The allowance method does not record bad debt expense until a customer's account receivable is determined to be uncollectible.
E) The write-off an uncollectible account does not impact the income statement.
Allowance Method
An accounting technique used to estimate and prepare for the amount of accounts receivable that may not be collected.
Contra Asset Account
An account on a company's balance sheet that reduces the value of a related account, used to account for items like depreciation, amortization, and allowances for doubtful accounts.
Realizable Value
The estimated amount that an asset can be sold for at the end of its useful life, minus any disposal costs.
- Comprehend the fundamentals of accounts receivable and the application of the allowance method.
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Learning Objectives
- Comprehend the fundamentals of accounts receivable and the application of the allowance method.
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