Accounting Chapter 14 True or False

False

A business having a $300.00 credit balance in Allowance for Uncollectible Accounts and estimating its uncollectible accounts to be $4,000.00 would record a $4,300.00 credit to Allowance for Uncollectible Accounts

False

A business usually knows at the end of the fiscal year which customer accounts will become uncollectible

True

A note provides the business with legal evidence of the debt should it be necessary to go to court to collect

True

Interest income is classified as an Other Revenue account

False

Interest income should not be recorded on a dishonored note receivable

True

Interest rates are stated as a percentage of the principal

True

The account Allowance for Uncollectible Accounts has a normal credit balance

False

The account Allowance for Uncollectible Accounts is reported on the income statement

False

The accounting concept Conservatism is applied when the process of making accounting estimates is free from bias

True

The adjusting entry for uncollectible accounts does not affect the balance of the Accounts Receivable account

True

The book value of accounts receivable must be a reasonable and unbiased estimate of the money the business expects to collect in the future

True

The direct write-off method of accounting for uncollectible accounts does not comply with GAAP

False

The expense of an uncollectible account should be recorded in the accounting period that the account becomes uncollectible.

True

The method for calculating interest is the same for notes payable and notes receivable

False

The percent of each age group of an accounts receivable aging that is expected to become uncollectible is determined by the Securities and Exchange Commission

True

The percent of sales method of estimating uncollectible accounts expense assumes that a portion of every dollar of sales on account will become uncollectible

False

Total assets are reduced when a business accepts a note receivable from a customer needing an extension of time to pay an account receivable

False

When a customer account is written off under the allowance method, book value of Accounts Receivable decreases

True

When a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected

False

When an account is written off as uncollectible, the business sends the customer a credit memo