Chapter 9 ACCT
The direct write-off method violates the matching principle by recording expenses in a different period than the revenues related to those expenses.
TRUE
The journal entry for estimating bad debts is a debit to bad debt expense and a credit to allowance for doubtful accounts
TRUE
The net realizable value of accounts receivable is calculated by taking accounts receivable minus the allowance for doubtful accounts related to those receivables.
TRUE
The percentage of completion method recognizes revenue based on the percentage of work done.
TRUE
The two approaches to calculate bad debt under the allowance method are the income statement approach and the balance sheet approach
TRUE
Under the allowance method, a company must estimate the amount of receivables that will not be collected at the time of sale.
TRUE
Under the direct write-off method, a company waits until it knows a customer cannot pay to record the bad debt expense
TRUE
When a seller of products records a sale, they have a two part entry. The first part is for the recording of the sale and the second part is for the recording of the cost (shift from inventory to cost of goods sold)
TRUE
The allowance for doubtful accounts is a contra asset account that offsets or reduces the value of accounts receivable.
TRUE
Bad debts have a positive impact on accounts receivable.
FALSE
It really isn't necessary for accounts receivable to have a subsidiary ledger.
FALSE
The completed contract method recognizes all revenue at the start of the project before work begins.
FALSE
The percentage of accounts receivable method is the income statement approach to estimating bad debt expense.
FALSE
The two approaches to calculate bad debt under the allowance method are the income statement approach and the cash flow approach
FALSE
A company can choose to treat a credit card sale as a credit sale (debit accounts receivable, debit credit card expense and credit sale) or as a cash sale (debit cash and credit sales)
TRUE
A write-off of bad debt means a company has identified a customer who will not pay their outstanding receivable balance. The write-off removes the customer's outstanding balance from the accounts receivable listing.
TRUE
Bad debt arise from a customer who breaks their promise to pay for a good or service that was provided.
TRUE
Long term construction contracts can take place over many years. Companies can choose to record revenue using the percentage of completion method or the completed contract method.
TRUE
The accounts receivable aging organizes the outstanding receivables based on how long the receivables are past due.
TRUE
The allowance for doubtful accounts can also be called the allowance for bad debts account
TRUE