ACC 291 Week 1: Questions And Answers

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ACC/291 Week 1 Discussion Questions 1. How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method? The direct write-off method is when a company determines that an account is uncollectible and it charges the loss to the Bad Debts Expense. An example of this would be when a customer is not able to pay their bill because due to a downturn in the economy, money may be tight if they have been laid off from their jobs or faced with unexpected hospital bills. Under the direct write-off method, companies record bad debts expense in a period that is different from the period in which they record the revenue. The method does not attempt to match bad debts expense to sales revenues in the income statement. The direct write-off method show accounts receivable in the balance sheet at the amount the company actually expects to receive. Unfortunately, unless bad debt losses are insignificant to the company, the direct write-off method is not acceptable for financial reporting…show more content…
Evidence of intangibles may exist in the form of contracts or licenses. Intangibles may arise from Government grants, such as patents, copyrights, and trademarks,acquisition of another business, and private monopolistic arrangements arising from contractual agreements, such as franchises and leases. Microsoft's patents, McDonald's franchises, and Apple's trade name iPod are some popular intangibles. Companies record intangible assets at cost. Intangibles are categorized as having either a limited life or an indefinite life. The issue with intangible assests is amortization. Amortization is when a company increases (debits) Amortization Expense, and decreases (credits) the specific intangible asset. (Unlike depreciation, no contra account, such as Accumulated Amortization, is usually

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