Question

The Allowance method of recording Bad Debt Expense is required because of the: A. B. D. C. Matching Principle Matching and Cost Principle Materiality Principle None of the above The Direct method of recording bad debts can be used if: A. B. C. The amount is small the Materiality Principle can be used the Revenue Principle is not violated all of the above D. Which accounting method for depreciation would you use if you wanted your EPS to be the highest: A. B. 200% Double Declining Balance. MACRS Straight Line Depreciation. Sum of the years Digits. C. D. In times of rising prices, which inventory method would you want to use if you were an CEO interested in issuing a new stock offer: A. B. LIFO Average FIFO None of the above

Answer 1

1. The Allowance Method of recording bad debt expense is required because of the matching principle. Matching principle requires you to record both revenue and expenses for the same period. Hence, Option A is the correct answer.

2. The direct method of recording bad debts can be used in case of all three options. Hence, Option D is the correct answer.

3. Option B is the correct answer.

4. Option C is the correct answer because in times of rising prices and wanting to issue a new stock, FIFO method would result in high inventory valuation