Accounting Chapter 8
True or False: A company will have receivables whenever it sells goods or services on credit.
True.
True or False: Accounts Receivable are also known as Trade Receivables.
True.
True or False: If the maker of the note fails to repay the borrowed amount on the maturity date, the note is said to be dishonored.
True.
True or False: Individual customer accounts of Accounts Receivable are known as subsidiary accounts.
True.
True or False: Notes Receivables represents an undertaking by a debtor to pay a fixed amount along with interest at a certain future date.
True.
True or False: Sales through credit cards or debit cards transfer the risk of collection of receivables from the seller to the card issuer.
True.
True or False: The aging-of-receivables method is a balance sheet approach of estimated uncollectible amounts.
True.
True or False: The direct write-off method for uncollectible accounts violates the matching principle.
True.
True or False: The expense associated with the cost of uncollectible accounts receivable is known as bad debts expense.
True.
True or False: The interest period extends from the original date of the note to the maturity date.
True.
True or False: The receivables of an organization can be categorized into accounts receivable, notes receivable, and other receivables.
True.
True or False: The terms of payment for a Note Receivable are longer than that of an Account Receivable.
True.
True or False: The maturity value of a note is the sum of the principal minus the interest due at maturity.
False. Maturity value is the sum of the principal PLUS the interest due at maturity.
True or False: The percent-of-sales method computes bad debts expense as a percentage of net cash sales.
False. The percent-of-sales method computes bad debts expense as a percentage of CREDIT sales.
True or False: The net realizable value of Accounts Receivable is calculated by subtracting Bad Debts Expense from Accounts Receivable.
False.The net realizable value of Accounts Receivable is calculated by subtracting the ALLOWANCE for uncollectible accounts.