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What is the effect of bad debts on revenue recognition

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Reference no: EM132523377

Question 1: What is the effect of bad debts on revenue recognition?

Multiple Choice:

Option 1: Bad debts must be of a remote likelihood in order to recognize revenue.

Option 2: Bad debts are deducted from revenue to calculate net revenue on the income statement, similar to sales returns.

Option 3: Bad debts are ignored when determining whether to recognize revenue, but recognized as an expense on the income statement.

Option 4: The seller must believe it is probable it will collect the amounts it is entitled to collect.

Reference no: EM132523377

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