Chapter 7 True/False

All claims held against customers and others for money, goods, or services are reported as current assets

False

Bank overdrafts are always offset against the cash account in the balance sheet

False

Cash equivalents are investments with original maturities of six months or less

False

Certificates of deposit are usually classified as cash on the balance sheet.

False

Companies include postdated checks and petty cash funds as cash.

False

Notes receivable are generally reported as noncurrent assets.

False

The percentage-of-receivables approach of estimating uncollectible accounts emphasizes matching over valuation of accounts receivable

False

The percentage-of-sales method results in a more accurate valuation of receivables on the balance sheet

False

The receivables turnover ratio is computed by dividing net sales by the ending net receivables.

False

Trade receivables include notes receivable and advances to officers and employees

False

When buying receivables with recourse, the purchaser assumes the risk of collectibility and absorbs any credit loss.

False

When the stated rate of interest exceeds the effective rate, the present value of the note receivable will be less than its face va

False

Companies record and report long-term notes receivable at the present value of the cash they expect to collect.

True

For receivables sold with recourse, the seller guarantees payment to the purchaser if the debtor fails to pay

True

In the gross method, sales discounts are reported as a deduction from sales

True

Recognition of a recourse liability will make a loss on sale of receivables larger than it would otherwise have been

True

Savings accounts are usually classified as cash on the balance sheet

True

Short-term, highly liquid investments may be included with cash on the balance sheet.

True

The net amount reported for short-term receivables is not affected when a specific account receivable is determined to be uncollectible.

True

Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different quantities purchased

True