The direct write off is used when. A. Uncollectible accounts are not anticipated
ID: 2490317 • Letter: T
Question
The direct write off is used when. A. Uncollectible accounts are not anticipated or immaterial. B. A company elects to use this method as one of several alternatives. C. A company has greater cash outflows than cash inflows. D the company expects excessive sales return.
The type of income statement that classifies items as operating and nonoperating is the ___ income statement. A. Consolidated, B. Multiple-step. C. Classified. D. Single-step
The gross profit ratio measures: A. The ratio of net income to net sales. B. How quickly the company receives inventory from its suppliers. C. The amount by which the sale of inventory exceeds its cost per dollar of sales. D. How many times during the year a company sells its average inventory balance
Explanation / Answer
B.
The company uses this as one of the methods.
This is used when the amount of bad debts is very small and hence direct write off has no major impact on the profitability.
The direct write off method is used when the amount that is written off is of immaterial amount.This is so because if we write off an immaterial amount, it will have minimum impact on the company’s financial results.
B.
Multi step income statement divides the income statement into two parts
Multi step income statements calculates operating expenses, deducts it from gross income arriving at income from operations. Then, it adds non operating revenues and subtracts non operating expenses to have net income .
C.
Gross profit=Sales-Cost of goods sold
Gross profit ratio=Gross profit/Sales *100
Ratio determines the percentage of gross profit per unit of sales.