Recognizing more bad debt expense in a year than is necessary in order to have flexibility in recognizing bad debt expense in a future year is an example of
A) a big bath charge.
B) creative acquisition accounting.
C) a cookie jar reserve.
D) premature recognition of revenue.

Question

Quizplus · Accepted Answer

This practice is known as a "cookie jar reserve," where companies overstate expenses or losses in good years to create a reserve that can be used to cover expenses or losses in bad years, smoothing out earnings over time.

Recognizing More Bad Debt Expense in a Year Than Is