1A GAAP standards do not allow companies to write off bad debt directly. Discuss the reasoning behind GAAP's requirement for companies to recognize bad debt by utilizing the allowance method vs the direct write off method. Justify why this is important and weigh pros and cons of the 2 allowable methods available; percentage of sales method & the aging of accounts receivable method.

1B Describe the different cost flow assumptions that are allowable per GAAP. Give an example of some possible reasons why a company would opt for one over the other.