Chapter 8 Review Questions

What is the maturity value of a $25,000, 9%, 4-month note receivable issued on December 1 if the company has a fiscal year end on December 31? A. $25,250 B. $25,750 C. $25,000 D. $27,250

B. $25,750 (The maturity value is the face value plus interest for the term of the note. Interest earned is calculated by multiplying the principal times the interest rate times the length of the note. Interest = $25,000 × 9% × 4/12 = $750. Maturity value = $25,000 + $750 = $25,750.)

Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)? A. 2,555 days B. 30 days C. 52 days D. 2 days

C. 52 days (The average collection period is computed by dividing the number of days in the year by the accounts receivable turnover or 365/7 = 52 days)

A captive finance company is one that is owned by the company selling the product. A. True B. False

True

Under the allowance method, the write off of an account receivable leaves the net realizable value of the receivables unchanged. A. True B. False

True

Short-term notes receivable are reported at their cash (net) realizable value. A. True B. False

True (Like accounts receivable, short-term notes receivable are reported at cash (net) realizable value.)

At what amount is a short-term notes receivable recorded on the issue date? A. Face value B. Fair market value C. Present value D. Maturity value

A. Face value

Which of the following is the correct sequence to report receivables on the balance sheet? A. A 6-month note receivable, other receivables, accounts receivable B. Accounts receivable, a 6-month note receivable, other receivables C. A 6-month note receivable, accounts receivable, other receivables D. Accounts receivable, other receivables, a 6-month note receivable

Accounts receivable, a 6-month note receivable, other receivables

Which one of the following statements is true? A. Bad Debts Expense and Allowance for Doubtful Accounts are both nominal accounts and are closed at the end of the fiscal period. B. Bad Debts Expense and Allowance for Doubtful Accounts are both real accounts and neither are closed at the end of the fiscal period. C. Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period. D. Bad Debts Expense is a real account and remains open at the end of the fiscal period, while Allowance for Doubtful Accounts is a nominal account and is closed at the end of the fiscal period.

C. Bad Debts Expense is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period. (Bad Debts Expense is a nominal or temporary account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.)

What type of receivables result from sales transactions? A. Other receivables B. Non-trade receivables C. Trade receivables D. Long-term receivables

C. Trade receivables (Accounts receivable and notes receivable resulting from sales transactions are called trade receivables.)

Receivables are reported on the balance sheet at the cash amount owed by customers. A. True B. False

False

The accounts receivables turnover is computed by dividing net sales by accounts receivable. A. True B. False

False

The direct write-off method violates the expense recognition principle. A. True B. False

True (The direct write-off method waits until a receivable has declined in value and is determined to be uncollectible before it is written off. This usually occurs after the end of the fiscal period of the related sale, which violates the expense recognition principle.)

When a note receivable is paid on time and no interest has been previously accrued, what will the journal entry to record the transaction contain? A. Two debits and one credit B. Two credits and one debit C. One debit and one credit D. None of the answer choices are correct

Two credits and one debit

Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment? A. $12,000 B. $7,000 C. $17,000 D. $300,000

A. $12,000 (Because the estimate is based on a percentage of receivables, the $800 balance in the Allowance accounts must be considered. The ending balance required in the allowance account is 7.5% times $160,000, or $12,000. Since there is already a balance of $5,000 in the allowance account, the difference of $7,000 should be added, resulting in a balance of $12,000.)

How much accrued interest should be reported on the payee's December 31 balance sheet on a $5,000, 8%, 9-month note receivable issued on June 1? A. $233 B. $300 C. $400 D. $33

A. $233 (Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued ($5,000 × 8% × 7/12 = $233).)

Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover? A. 6.4 B. 8.0 C. 5.3 D. 4.0

A. 6.4 (The accounts receivable turnover is computed by dividing net credit sales by average net accounts receivable. $800,000/[($100,000 + $150,000)/2] = 6.4)

What approach does IFRS require when testing whether the value of loans and receivable are impaired? A. A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group. B. A company should write off those receivables that are impaired, and then attempt to collect those amounts. C. A company should estimate how much will not be collected, and then write off amounts not collected. D. A company should look at specific loans and receivables to determine if impaired, and then write those off.

A. A company should look at specific loans and receivables to determine if impaired, and then evaluate as a group.

What type of receivable is evidenced by a formal instrument and normally requires the payment of interest? A. An account receivable B. A trade receivable C. A note receivable D. Past-due accounts receivables

A. A note receivable (A note receivable represent claims for which formal instruments of credit are issued as evidence of the debt. The note normally requires the payment of the principal and interest on a specific date.)

Which one of the following is the correct presentation of Accounts Receivable and its contra account on the balance sheet? A. Accounts Receivable $642,000 Less: Allowance for Doubtful Account (2,000) $640,000 B. Accounts Receivable $642,000 Plus: Allowance for Doubtful Accounts 2,000 $644,000 C. Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) $625,000 D. Accounts Receivable $642,000 Less: Bad Debt Expense (17,000) Less: Allowance for Doubtful Accounts (2,000) $623,000

A. Accounts Receivable $642,000 Less: Allowance for Doubtful Account (2,000) $640,000 (The contra asset account is deducted from Accounts Receivable resulting in the cash (net) realizable value.)

Ryan Leaf Company uses the percentage-of-receivables method for recording bad debts expense. The accounts receivable balance is $60,000 at year-end and the total credit sales were $2,300,000 for the year. Management estimates that 3% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a credit balance of $200 before adjustment? A. Bad Debts Expense 1,600 Allowance for Doubtful Accounts 1,600 B. Bad Debts Expense 1,800 Allowance for Doubtful Accounts 1,800 C. Bad Debts Expense 1,600 Accounts Receivable 1,600 D. Allowance for Doubtful Accounts 1,800 Bad Debt Expense 1,800

A. Bad Debts Expense 1,600 Allowance for Doubtful Accounts 1,600 (The Allowance for Doubtful Accounts needs an ending credit balance of 3% of $60,000 or $1,800. Since the preadjusted credit balance is $200, a credit of $1,600 will increase it to $1,800. The journal entry will record a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $1,600.)

RyTronics uses the percentage of receivables method for estimating bad debts expense. The Accounts Receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry will be recorded if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment? A. Bad Debts Expense 3,200 Allowance for Doubtful Accounts 3,200 B. Bad Debts Expense 4,000 Allowance for Doubtful Accounts 4,000 C. Bad Debts Expense 3,200 Accounts Receivable 3,200 D. Allowance for Doubtful Accounts 4,000 Bad Debt Expense 4,000

A. Bad Debts Expense 3,200 Allowance for Doubtful Accounts 3,200 (Allowance for Doubtful Accounts needs an ending credit balance of 4% of $100,000 or $4,000. To increase the current credit balance of $800 to the required amount of $4,000, the account requires a credit of $3,200. The entry to estimate bad debts is a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $3,200.)

Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. Which of the following is/are the debit entry(ies) required to record this transaction by Good Stuff Retailers? A. Cash $48,000 and Service Charge Expense $2,000 B. Accounts Receivable $48,000 and Service Charge Expense $2,000 C. Cash $50,000 D. Accounts Receivable $50,000

A. Cash $48,000 and Service Charge Expense $2,000 ( The entry includes a credit to Sales for $50,000, a $48,000 debit to Cash, and a debit to Service Charge Expense for $2,000.)

Laurel Company factors $300,000 of receivables to Hardy Factors. Hardy assesses a 3% fee on the amount of receivables sold. Laurel Co. factors its receivables to Hardy regularly. What journal entry does Laurel make when the factoring occurs? A. Cash 291,000 Service Charge Expense 9,000 Accounts Receivable 300,000 B. Cash 291,000 Accounts Receivable 291,000 C. Cash 300,000 Gain on Sale of Receivables 9,000 Accounts Receivable 291,000 D. Cash 291,000 Loss on Sale of Receivables 9,000 Accounts Receivable 300,000

A. Cash 291,000 Service Charge Expense 9,000 Accounts Receivable 300,000 (This entry records the receipt of cash as a debit for $291,000, recognizes the service charge expense based on a percentage of the receivables as a debit to Service Charge Expense for $9,000, and reduces accounts receivable with a credit for the face value of the receivables that are sold, which is $300,000.)

A company holds a 120-day, 10%, $21,000 note which was not paid in full on the maturity date. Which of the following will the journal entry on the maturity date include? A. Debit to Accounts Receivable for $21,700 B. Credit to Notes Receivable for $21,700 C. Debit to Cash for $21,700 D. Debit to Notes Receivable for $21,000

A. Debit to Accounts Receivable for $21,700

Which one of the following is not one of the principles of managing accounts receivable? A. Determining from which vendor credit should be requested B. Establishing a payment period C. Monitoring collections D. Accelerating cash receipts from receivables when necessary

A. Determining from which vendor credit should be requested (Requesting credit from a vendor is a concern for dealing with accounts payable. Determining to whom to extend credit is a principle of managing accounts receivable.)

On the date a 90-day note is honored, how much cash will the payee receive? A. Face value plus 90 days of interest B. Maturity value plus 90 days of interest C. Face value D. Maturity value less the face value

A. Face value plus 90 days of interest (The maturity value is equal to face value of the note (the principal) plus interest accrued for the 90-day term of the note. )

Which of the following accounts is debited when a company factors its accounts receivable? A. Service Charge Expense B. Interest Expense C. Loss on Sale of Accounts Receivable D. Accounts Receivable

A. Service Charge Expense (Service Charge Expense and Cash are the two accounts debited when accounts receivable are factored.)

Notes receivable are reported in the current assets section of the balance sheet at A. cash (net) realizable value. B. Market value. C. total principal plus interest for the term of the loan. D. the selling price at which the inventory was sold to the customers.

A. cash (net) realizable value. (Companies report accounts receivable, notes receivable, and other receivables in the current asset section of the balance sheet at their expected cash (net) realizable value.)

Which of the following is the value at which loans and receivables should be reported under IFRS? A. Cash realizable value B. Amortized cost C. Net of bad debt expense D. Maturity value

Amortized cost

Net credit sales are $800,000, average net receivables total $150,000, average inventory totals $200,000, and the allowance for doubtful accounts totals $8,000. How much is the average collection period? A. 5.33 days B. 68.5 days C. 2.2 days D. 328.8 days

B. 68.5 days (The accounts receivable turnover is net credit sales ($800,000) divided by average net accounts receivable ($150,000), or 5.33 times. The average collection period is 365 divided by the accounts receivable turnover, which is 365/5.33 = 68.5 days.)

Which statement is true about reporting receivables on the balance sheet? A. Bad Debts Expense and Allowance for Doubtful Accounts are shown as a deduction from Accounts Receivable on the balance sheet. B. Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. C. Bad Debts Expense is is shown as a deduction from Accounts Receivable on the balance sheet. D. Bad Debts Expense is subtracted from Accounts Receivable and is then shown as a deduction from Accounts Receivable on the balance sheet.

B. Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet. (Allowance for Doubtful Accounts is a contra asset account that is shown as a deduction from Accounts Receivble on the balance sheet in the current asset section.)

Kerrison Copany sold $6,000 of merchandise to customers who charged their purchases with a bank credit card. Kerrison's bank charges it a 4% fee. Which one of the following is part of the journal entry to record the credit card sales? A. Debit to Cash for $5,760 B. Credit to Sales for $5,760 C. Debit to Cash for $6,000 D. Credit to Service Charge Expense for $240

B. Debit to Cash for $5,760 (The fee is 4% times $6,000, or $240. Kerrison will receive the difference between the face amount of the receivables and the fee, or $5,760. The journal entry includes a debit to cash for $5,760, a debit to Service Charge Expense for $240, and credit to sales for $6,000.)

Butte Co. loaned $25,000 to Beavis Co. on June 1, at 12% interest for 3 months. What adjusting entry will Butte Co. have to make on June 30 before preparing the financial statements on June 30? A. Interest Receivable 750 Interest Revenue 750 B. Interest Receivable 250 Interest Revenue 250 C. Interest Receivable 1,000 Interest Revenue 1,000 D. Interest Receivable 3,000 Interest Revenue 3,000

B. Interest Receivable 250 Interest Revenue 250 (Interest earned is calculated by multiplying the principal times the interest rate times the portion of the year that has passed since the note was issued. ($25,000 × 12% × 1/12 = $250).)

Which of the following should be classified as an "other" receivable? A. Trade receivables B. Interest receivable C. Accounts receivable D. Notes receivable

B. Interest receivable (Trade, accounts, and notes receivables are financial instruments typically accepted from customers for the value of a transaction. Interest receivable results because of the time value of money.)

Michael Co. accepts a $4,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is: A. Notes Receivable 4,120 Accounts Receivable 4,120 B. Notes Receivable 4,000 Accounts Receivable 4,000 C. Notes Receivable 4,000 Sales 4,000 D. Notes Receivable 4,120 Sales 4,120

B. Notes Receivable 4,000 Accounts Receivable 4,000 (On the date Michael accepts the note, Notes Receivable is debited for $4,000 and Accounts Receivable is credited for $4,000. Interest is accrued only with the passage of time.)

Which one of the following is not one of the five basic issues in accounting for notes receivable? A. Recognizing notes receivable B. Realizing notes receivable C. Valuing notes receivable D. Disposing of notes receivable

B. Realizing notes receivable

Which of these statements about Visa credit card sales is incorrect? A. The credit card issuer conducts the credit investigation of the customer. B. The retailer is not involved in the collection process. C. The retailer must wait to receive payment from the issuer. D. The retailer receives cash more quickly than it would from individual customers.

B. The retailer must wait to receive payment from the issuer. (There is no wait for payment. The retailer receives payment at the time the credit card is accepted from the customer.)

When is a receivable recorded by a service organization? A. When the customer pays B. When service is provided on account C. When the related expenses are incurred D. When the bill is sent to the customer

B. When service is provided on account (A receivable is recorded when the service is performed, not at some other specific date.)

Factoring is the process of A. determining the percentage of accounts receivable expected to be collected. B. selling accounts receivable at a discount to another party. C. determining the average collection period. D. determining the allowance for doubtful accounts value.

B. selling accounts receivable at a discount to another party. (Factoring is the process of selling accounts receivable to another party)

During 2014, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2014, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014? A. $20,000 B. $28,000 C. $32,000 D. $30,000

C. $32,000 (After the write-offs are recorded, Allowance for Doubtful Accounts will have a debit balance of $12,000 ($18,000 credit beginning balance combined with a $30,000 debit for the write-offs). The desired balance, using the percentage of receivables basis, is a credit balance of $20,000 ($200,000 × 10%). In order to have an ending balance of $20,000, a credit entry of $32,000 must be made to Allowance for Doubtful Accounts. Thus, the amount of the adjusting entry must be $32,000.)

On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24? A. $700 B. $680 C. $686 D.None of the answer choices are correct.

C. $686 (The amount received on June 24 is $686. Because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 - return of $300) minus the discount of $14 ($700 × 2%), for a cash amount of $686.)

Which one of these statements about promissory notes is incorrect? A. The party making the promise to pay is called the maker. B. The party to whom payment is to be made is called the payee. C. A promissory note is not a negotiable instrument. D. A promissory note is more liquid than an account receivable.

C. A promissory note is not a negotiable instrument. (Promissory notes are negotiable instruments, meaning if sold, the seller can transfer to another party by endorsement.)

When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process? A. Allowance for Doubtful Accounts and Cash B. Cash and Account Receivable C. Accounts Receivable and Allowance for Doubtful Accounts D. Allowance for Doubtful Accounts and Bad Debts Expense

C. Accounts Receivable and Allowance for Doubtful Accounts (When an uncollectible account is recovered after its has been written off, Allowance for Doubtful Accounts will be credited and Accounts Receivable will be debited in the first entry. The second entry requires a credit to Accounts Receivable and a debit to Cash.)

Which one of the following is part of the transaction that is recorded when an account is written off under the allowance method? A. Bad Debts Expense account is debited. B. Accounts Receivable account is debited. C. Allowance for Doubtful Accounts is debited. D. Loss on Accounts Receivable account is debited.

C. Allowance for Doubtful Accounts is debited (The debit account is Allowance for Doubtful Accounts, and Accounts Receivable is credited to remove the customer's account.)

At what value are accounts receivable reported on the balance sheet? A. Fair market value B. Present value C. Cash (net) realizable value D. Maturity value

C. Cash (net) realizable value (Accounts receivable are reported at net realizable value. This value is the total amount due less an estimate for doubtful accounts.)

A 90-day promissory note is issued on September 15th. What is the note's maturity date? A. December 16 B. December 15 C. December 14 D. December 13

C. December 14 (You must count the number of days. The date the note is issued is omitted, while the due date is counted. September has 15 days beginning with September 16 through the 30. October has 31 days. November has 30 days. There are 14 days in December during the note's term to total to 90 days.)

Danta Company has a March 31 fiscal year end. What is the maturity value of a $25,000, 12%, 3-month note receivable dated March 1? A. $25,000 B. $28,000 C. $25,250 D. $25,750

D. $25,750 (The maturity value is the face value plus interest for the term of the note. Interest earned is calculated by multiplying the principal times the interest rate times the length of the note. Interest = $25,000 × 12% × 3/12 = $750. Maturity value = $25,000 + $750 = $25,750.)

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal the following data: - Accounts receivable $800,000 - Allowance for doubtful accounts balance before adjustment (credit) 12,000 - Amounts expected to become uncollectible 65,000 How much is the cash (net) realizable value of the accounts receivable at December 31, after adjustment? A. $747,000 B. $788,000 C. $723,000 D. $735,000

D. $735,000 (The cash (net) realizable value of the accounts receivable is accounts receivable less the ending balance in the Allowance for Doubtful Accounts. In this case, accounts receivable is $800,000 and the ending balance in Allowance for Doubtful Accounts is $65,000. This results in cash (net) realizable value of $800,000 less $65,000, or $735,000.)

Which of the following is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company? A. Concentration risk B. Payment risk C. Credit risk D. A concentration of credit risk

D. A concentration of credit risk (A threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of a company is called a concentration of credit risk.)

Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable? A. Allowance for Doubtful Accounts B. Loss on Notes Receivable C. Bad Debts Expense D. Accounts Receivable

D. Accounts Receivable

Obama Company has identified that Bill Clinton's receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method? A. Accounts Receivable 100 Bad Debts Expense 100 B. Bad Debts Expense 100 Accounts Receivable 100 C. Allowance for Doubtful Accounts 100 Bad Debts Expense 100 D. Allowance for Doubtful Accounts 100 Accounts Receivable 100

D. Allowance for Doubtful Accounts 100 Accounts Receivable 100 (The proper journal entry debits Allowance for Doubtful Accounts and credits Accounts Receivable.)

If a company uses the allowance method for uncollectible accounts, then the entry to record $800 of estimated uncollectibles is: A. Bad Debts Expense 100 Accounts Receivable 100 B. Allowance for Doubtful Accounts 800 Accounts Receivable 800 C. Accounts Receivable 800 Allowance for Doubtful Accounts 800 D. Bad Debts Expense 800 Allowance for Doubtful Accounts 800

D. Bad Debts Expense 800 Allowance for Doubtful Accounts 800 (The journal entry to record the estimate of uncollectible accounts is a debit to Bad Debts Expense and a credit to the Allowance for Doubtful Accounts.)

Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. What is the entry to be made by Schleis Co. when the note is collected, assuming no interest has previously been accrued? A. Cash 10,300 Notes Receivable 10,300 B. Cash 10,000 Notes Receivable 10,000 C. Accounts Receivable 10,300 Notes Receivable 10,000 Interest Revenue 300 D. Cash 10,300 Notes Receivable 10,000 Interest Revenue 300

D. Cash 10,300 Notes Receivable 10,000 Interest Revenue 300 (When Schleis receives payment, it will increase cash, reduce the notes receivable account, and recognize interest earned for the term of the note. Interest = $10,000 × 9% × 120/360 = $300. Total cash received = $10,000 + $300 = $10,300.)

What is often the most critical part of managing receivables? A. Establishing a payment period B. Determining which method to use to account for bad debts C. Monitoring the receivables D. Determining who gets credit and who doesn't

D. Determining who gets credit and who doesn't

On May 2, Wainwright Company receives a $3,000, 4-month, 10% note from Fulton Company as a settlement of its accounts receivable. What entry will Wainwright Company make when it receives the note on May 2? A. Notes Receivable 3,100 Accounts Receivable 3,100 B. Notes Receivable 3,000 Interest Receivable 3,000 Accounts Receivable 3,000 Interest Revenue 100 C. Notes Receivable 3,100 Sales 3,100 D. Notes Receivable 3,000 Accounts Receivable 3,000

D. Notes Receivable 3,000 Accounts Receivable 3,000 (On the date Wainwright accepts the note, it is recorded at face amount. Interest is accrued only with the passage of time. Notes Receivable will be debited for $3,000 and Accounts Receivable will be credited for $3,000.)

If a company is concerned about lending money to a risky customer, which one of the following would it not want to do? A. Require the customer to pay cash in advance B. Require the customer to provide a letter of credit or a bank guarantee C. Contact references provided by the customer, such as banks and other suppliers D. Provide the customer a lengthy payment period to increase the chance of paying

D. Provide the customer a lengthy payment period to increase the chance of paying (Longer payment period will increase the chances the company will not pay. Companies might require risky customers to provide letters of credit or bank guarantees, require them to pay cash in advance, or ask for references from banks and suppliers to determine their payment history.)

Which one of the following is not a method used by companies to accelerate cash receipts? A. Offering discounts for early payment B. Accepting national credit cards for customer purchases C. Selling receivables to a factor D. Writing off receivables

D. Writing off receivables (Management can accelerate the collection of cash from receivables by selling its receivables, by allowing customers to pay with bank credit cards, and by offering discounts for early payment.)

Allowance for Doubtful Accounts is closed at the end of the fiscal year. A. True B. False

False (Only nominal accounts are closed at the end of the fiscal period. TheAllowance for Doubtful Accounts is a real account and remains active and open from fiscal period to fiscal period.)

Which issue will the IASB and FASB continue to resolve as they work toward convergence? A. How to estimate uncollectible amounts B. How to report receivables on the balance sheet C. How to recognize fair values of financial instruments D. How to recognize receivables in the accounting records

How to recognize fair values of financial instruments