Problem 10: Miscellaneous 10.1) Choose the correct statement(s) below regarding
ID: 2562260 • Letter: P
Question
Problem 10: Miscellaneous 10.1) Choose the correct statement(s) below regarding the direct write-off method for calculating bad debt expense. I. It is not normally consistent with GAAP and accrual accounting. II. Its use tends to result in an overstatement of accounts receivable on the balance sheet. III. Undér this method, bad debt expense is recognized when a specific account is determined to be uncollectible. a) III only. b) I and III only. c) II only. d) I, II and III. 10.2) Which of the following inventory valuation methods produce(s) the same dollar amount as the balance in ending inventory under both periodic and perpetual inventory systems? Yes No Yes No Yes Yes No No a. d. 10.3) Which of the following items is capitalized and amortized instead of being expensed? a) Costs of developing software after achieving technological feasibility but before the commencement of commercial production. b) Cost of a machine that is acquired for a specific R&D; project that has no alternative use to the company c) Costs of developing a treatment for cancer. d) Costs of an advertising campaign designed to maintain goodwill.Explanation / Answer
10.1) The option b) I and III is the correct option.
Explanation:
Direct write-off is not allowed in case of GAAP
This method presumes bed debt expenses to be recognized as and when any specific accounts receivable is considered as uncollectible.
10.2) the option c) FIFO - Yes, LIFO - No is the correct option.
Explanation:
Under FIFO method inventory valuation the ending inventory value under periodic and perpetual inventory will be of same dollar but not in the case of LIFO.
10.3) Option a) is the correct option.
Explanation:
costs of developing software before commencement of commercial production should be capitalized and amortized.