ACCT Chapter 6 Quiz
What effect does the bad debt expense have on the net realizable value of the accounts receivable and on net income?
Decreases NRV and Net Income.
Bad Debts Expense is a contra account that is used to reduce accounts receivable to its net realizable value.
False.
If a company is basing their bad debt expense on an aging schedule of accounts receivable they are using the income statement method to estimate bad debt expense.
False.
Writing off an uncollectible account when using the allowance method has what effect on the accounting equation?
No effect.
Accounts receivable are shown on the balance sheet at their net realizable value.
True.
Recording the collection of a previously written off account will not affect the income statement.
True.
The balance sheet approach of estimating uncollectible accounts takes into account the existing balance in the Allowance for Doubtful Accounts account.
True.
The direct write off method of accounting for bad debt is allowed under GAAP if accounts receivable are immaterial.
True.
The direct write-off method of accounting for bad debts is allowed under GAAP, but only if the company's account receivables are immaterial.
True.
The normal balance of the Allowance for Doubtful Accounts account is a credit.
True.
