Question

Which of the following statements concerning bad debt losses is most correct?

                        a.         Bad debt losses are not reported on the income statement but are reported in the notes.

                        b.         Bad debt losses are reported on the balance sheet.

                        c.         Bad debt losses historically have been reported as an expense item on the income statement but will now be reported as a deduction from revenues.

                        d.         Bad debt losses are reported in the nonoperating income section of the income statement.

                        e.         Bad debt losses occur because health services organizations provide charity (indigent) care.

Answer 1

Option C is correct. Bad debt losses historically have been reported as an expense item on the income statement but will now be reported as a deduction from revenues.

As per Accounting Standard Update ASU 2014-09 Revenue from contracts with customers which made the health service organisations to remove Bad debt losses as a separate line item but instead make bad debt losses as an deduction from revenues.