Q1Tieppo Cycles Pty Ltd currently adopts the Direct Method to write-off a debt as uncollectable (bad debt). The company has decided to change its accounting policy to the Allowance Method. On 2 June 2020, Tieppo Cycles Pty Ltd deemed that Mr. Schofield could not pay a debt of $600 and the amount was written off as a bad debt. The journal entry to record the uncollectable amount was DR: Bad Debts $600 and CR: Accounts receivable Schofield $600. If the company now decides to adopt the Allowance Method with an opening balance in the Allowance for Doubtful Debts of $2,000 CR. The company now records the write-off of the bad debt under the Allowance Method and reverses the direct method write-off of the Schofield debt. What would be the impact on the financial reports if a change of accounting policy on 2 June 2020 was undertaken from the Direct Method to the Allowance Method? Group of answer choices

No impact on the current asset Accounts receivable, a decrease in the contra current asset Allowance for doubtful debts and a decrease in the expense account bad debts.

Decrease in the current asset Accounts receivable and a decrease in the expense account bad debts

No impact on the current asset Accounts receivable, a decrease in the contra current asset Allowance for doubtful debts and an increase in the expense account bad debts.

No impact on the current asset Accounts receivable, an increase in the contra current asset Allowance for doubtful debts and a decrease in the expense account bad debts.

Q2

Quill & Pens Stationery Pty Ltd decides to write off a debt of $450 from one customer. Quill & Pens Stationery Pty Ltd adopts the Allowance Method of writing off a bad debt. (Disregard GST) What would be the effect on the relevant accounts if the $450 write off was not recorded? Group of answer choices

Understate Accounts receivable by $450 and overstate Allowance for Doubtful Debts by $450

Overstate Accounts receivable by $450 and overstate Allowance for Doubtful Debts by $450

Overstate Accounts receivable by $450 and understate Allowance for Doubtful Debts by $450

Understate Accounts receivable by $450 and overstate Bad Debts by $450