1. Why is the allowance method preferred over the direct write-off method of accounting for uncollectable account expense (i.e. bad debt expense)?

a. Allowance method is used for tax purposes.

b. Estimates are used.

c. Determining worthless accounts under direct write-off method is difficult to do.

d. Improved matching of uncollectable account expense (i.e. bad debt expense )with revenue.

2. Vasguez Corporation had a 1/1/14 credit balance in the Allowance for Doubtful Accounts of $30,000. During 2014, it wrote off $21,600 of accounts and collected $6,300 on accounts previously written off. The balance in Accounts Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/14, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible. What is uncollectable account expense (i.e. Bad Debt Expense) for 2014?

a. $6,000.

b. $21,300.

c. $27,600.

d. $36,000.

3. McGlone Corporation had a 1/1/14 credit balance in the Allowance for Doubtful Accounts of $25,000. During 2014, it wrote off $18,000 of accounts and collected $5,250 on accounts previously written off. The balance in Accounts Receivable was $500,000 at 1/1 and $600,000 at 12/31. At 12/31/14, McGlone estimates that 5% of accounts receivable will prove to be uncollectible. What should McGlone report as its Allowance for Doubtful Accounts at 12/31/14?

a. $12,000.

b. $12,250.

c. $17,250.

d. $30,000.