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Direct write-off method

1. When the direct write-off method of recognizing bad debt expense is used, the entry to write off a specific customer account would
a. increase net income.
b. have no effect on net income.
c. increase the accounts receivable balance and increase net income.
d. decrease the accounts receivable balance and decrease net income.

2. When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of a small account previously written off would
a. increase net income.
b. increase the allowance for doubtful accounts.
c. decrease net income.
d. decrease the allowance for doubtful accounts.

3. Which of the following is not a basic characteristic of a system of cash control?
a. Use of a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received
d. Internal audits at irregular intervals

Solution Preview

1.d. decrease the accounts receivable balance and decrease net income.
The write off would reduce receivables, ...

Solution Summary

The solution explains the correct alternative in relation to the direct write-off method

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