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Discuss how over-estimated allowance for doubtful accounts

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Question - Marvin Gaye Company has significant amounts of trade accounts receivable. Marvin Gaye uses the allowance method to estimate bad debts instead of the direct write-off method. During the year, some specific accounts were written off as noncollectable, and some that were previously written off as noncollectable were collected.

What are the deficiencies of the direct write-off method over the allowance method?

What are the two basic allowance methods used to estimate bad debts? Provide examples?

How should Marvin Gaye account for the collection of the specific accounts previously written off as noncollectable under allowance method?

Discuss how over-estimated allowance for doubtful accounts are adjusted for the tax purpose? Explain with help of an appropriate example?

Reference no: EM132949234

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