Bad Debt Expense

When a company has a policy of making sales for which credit is extended, it is reasonable to expect a portion of those sales to be uncollectible. As a result, a company must recognize bad debt expense. The two methods of recognizing bad debt expense are the (1) direct write-off method and (2) allowance method.

Required:

Describe fully both the direct write-off method and the allowance method of recognizing bad debt expense.Explain the reasons why one of these methods is preferable to the other and the reasons why the other method is not usually in accordance with generally accepted accounting principles.

Respond to the prompts for this case. Once you have answered the questions, choose an allowance method and describe how it is used. Explain why you believe the allowance method you have chosen gives a better representation of the actual collectability of accounts receivable. Use your readings from the text and at least one additional academic resource to provide support for your response. The following resource can be used along with any others that are considered authoritative on the subject: FASB Codification AICPA website IASB website When responding to two of your peers, identify strengths and/or weaknesses in the allowance methods they chose to discuss.