Indicate whether each statement best describes the allowance (A) method or the direct write-off (DW) method.

$\underline{\qquad}$ 1. Does not predict bad debts expense.

$\underline{\qquad}$ 2. Accounts receivable on the balance sheet is reported at net realizable value.

$\underline{\qquad}$ 3. The write-off of a specific account does not affect net income.

$\underline{\qquad}$ 4. When an account is written off, the debit is to Bad Debts Expense.

$\underline{\qquad}$ 5. Usually does *not* best match sales and expenses because bad debts expense is not recorded until an account becomes uncollectible, which usually occurs in a period after the credit sale.

$\underline{\qquad}$ 6. Estimates bad debts expense related to the sales recorded in that period.

Solution

VerifiedIn this activity, we must choose whether each statement better reflects the allowance (A) method or the direct write-off (DW) method.