Acc 291 Discussion Questions
DQ1: The direct write-off method involves removing a certain account receivable from accounting records when it actually becomes uncollectible. However, this method is only acceptable when bad debts are considered to be immaterial; otherwise it would be in violation of the matching principle as the sales revenue will be recorded in one period and the bad debts expense relating to those credit sales may be recognized in a subsequent period. In contrast, under the allowance method an ‘estimated’ bad debts expense would be recorded in the same accounting period as the related sales.
DQ2: Intangible assets should not ‘always’ be amortized over their legal lives. Intangible assets having an identifiable useful life should be amortized over their economic useful life or legal life, depending on whichever is lower. Such intangible assets include patents and copyrights. Amortization takes place on straight-line basis. However, intangible assets with infinite useful lives are not amortized, but tested for impairment annually.
DQ1: Valuation refers to recording and disclosing assets at their current market price. Depreciation refers to allocation of cost of a tangible fixed asset over its estimated useful life. Amortization refers to the systematic write-off of cost of an intangible asset over its economic useful life. Depletion refers to the depreciation of wasting assets like mi